{
  "$type": "site.standard.document",
  "bskyPostRef": {
    "cid": "bafyreifvdp46pptph4uvp5qzqy2y4t2tq47brh63wzret7isq5uvf47ryq",
    "uri": "at://did:plc:ls6rbbwjyqeakittcsi3k6x3/app.bsky.feed.post/3mdu7255gibu2"
  },
  "coverImage": {
    "$type": "blob",
    "ref": {
      "$link": "bafkreihp4ot4yskh7dlk7ariro5wtnamg762g6zfk2ftlbzcp3hqcotcti"
    },
    "mimeType": "image/png",
    "size": 239011
  },
  "description": "I have changed my plan for publishing these routine posts (monthly/weekly). I will now simply append new updates, adding each week's/month's new materials in one post, so that I won't be email bombing you. This is where you will find all monthly updates for 2026.\n\n\n\n\n\n\n202602\n\n\nMarket Narrative\n\n\nMacro\n\nFebruary was a month of decisive regional rotation and style reversal across global developed markets. The defining theme was the sharp divergence between a faltering US equity market and a resur",
  "path": "/2026-01-global-dm-monthly-recap/",
  "publishedAt": "2026-02-02T06:15:31.000Z",
  "site": "https://www.jasonandjarvis.org",
  "tags": [
    "Open this more visual friendly version in a new tab/点击跳转查看原文,左上角切换中文"
  ],
  "textContent": "**I have changed my plan for publishing these routine posts (monthly/weekly). I will now simply append new updates, adding each week's/month's new materials in one post, so that I won't be email bombing you. This is where you will find all monthly updates for 2026.**\n\n# 202602\n\n## Market Narrative\n\n### Macro\n\nFebruary was a month of decisive regional rotation and style reversal across global developed markets. The defining theme was the sharp divergence between a faltering US equity market and a resurgent rest-of-world, particularly Europe and Japan. The S&P 500 posted a modest decline while NASDAQ fared worse, dragged by weakness in mega-cap tech and Consumer Discretionary. In stark contrast, Japan was the best-performing DM market by a wide margin — driven by significant PE re-rating and strong local currency momentum — while Europe continued its steady grind higher, supported by broad sector strength across Industrials, Consumer Staples, and Utilities. MSCI EAFE meaningfully outperformed the US on both an MTD and YTD basis, a trend that has been building since the start of the year.\n\nSector leadership flipped decisively toward old-economy and defensive names. Materials, Utilities, and Energy led globally, while Telecom, Consumer Discretionary, and IT lagged. This was not merely a price phenomenon — the driver decomposition shows that the outperformance of Materials was backed by genuine EPS upgrades, while the underperformance in Telecom and Consumer Discretionary was amplified by PE de-rating. IT is a fascinating case: despite being the only sector with meaningfully positive EPS revisions at both the Q1 and full-year level, its price action was negative, suggesting a crowded positioning unwind and valuation fatigue rather than a fundamental deterioration.\n\nStyle factors confirmed the rotation. Value massively outperformed Growth in the US, and Defensive crushed Cyclical by an unusually wide margin. Small caps (Russell 2000) outperformed large caps, and Quality and Momentum factors also delivered positive alpha. This is consistent with a market that is de-risking from the concentration trade and broadening out — a dynamic that is healthy in isolation but historically associated with late-cycle regime shifts.\n\nOn the earnings front, the picture is nuanced. S&P 500 Q4 2025 results were strong — the index posted its fifth consecutive quarter of double-digit earnings growth, with the Magnificent 7 delivering meaningfully above-trend results. However, the composition of the top contributors is telling: industrial turnarounds like GE Vernova and Boeing (driven by one-off gains) contributed more to aggregate EPS growth than the tech megacaps, suggesting the headline number somewhat flatters the underlying organic trend. Looking ahead, analysts have trimmed Q1 2026 EPS estimates modestly — a smaller cut than the historical average — while progressively raising estimates for the back half of 2026. Full-year 2026 EPS expectations have drifted higher, led by IT and Materials, though Energy and Healthcare face notable headwinds.\n\nValuations remain stretched in the US — the S&P 500 forward PE sits well above both its 5-year and 10-year averages — while Europe and Japan are more reasonably priced, which partly explains the capital rotation. Cross-asset volatility is low: VIX is moderate, credit spreads (both US HY and Asia HY) sit near multi-year tights, and the Goldman Sachs Financial Conditions Index suggests accommodative conditions across DM. However, there are subtle warning signs: the Smart Money Flow Index has been diverging bearishly from the DJIA, intra-market correlations are at extreme lows (a classic stock-picker's market but also historically a precursor to correlation spikes), and the SKEW remains elevated, indicating persistent demand for tail-risk hedging beneath the calm surface.\n\nIn FX, the USD has been on a mild weakening trajectory YTD, with the EUR and several commodity currencies strengthening — consistent with the \"rest-of-world over US\" theme. Commodities told a clear story: precious metals dominated, with Gold posting a spectacular rally and Silver outperforming even further. This aligns with the macro regime of dollar weakness, persistent inflation hedging demand, and central bank accumulation. Natural Gas was the major outlier on the downside, collapsing sharply.\n\nThe BofA Global Fund Manager Survey paints the picture of a market that is \"extremely bullish\" in sentiment but increasingly uncomfortable with its own positioning. The broadest FMS sentiment indicator is at its highest since mid-2021. \"No landing\" has surged to become the consensus view for the first time, with over half of respondents now expecting the global economy to avoid any meaningful slowdown. Expectations for double-digit earnings growth are at multi-year highs. Cash levels have ticked up slightly from record lows but remain near the bottom of the historical range. The BofA Bull & Bear Indicator is flashing a contrarian \"sell\" signal — a condition that has persisted since December. In short, the macro consensus is overwhelmingly positive, which paradoxically raises the bar for further upside.\n\n### Policy\n\nThe policy landscape in February was shaped by three interlocking themes: the upcoming Fed leadership transition, the looming US midterm elections, and rising concerns about structural misallocation of capital — particularly around AI.\n\nThe most consequential near-term policy development is the expected appointment of Kevin Warsh as the next Fed Chair. Fund managers are pricing in a hawkish-but-dollar-bearish outcome: the plurality view is that Warsh will preside over higher Treasury yields combined with a weaker dollar. This is a non-trivial consensus — it implies that markets expect Warsh to be less accommodative than the current regime (hence higher yields) while simultaneously expecting his policies to erode confidence in US fiscal discipline or the dollar's reserve status (hence dollar weakness). This combination, if it materializes, would have profound implications for asset allocation: it favors non-US equities, real assets, and commodities over US duration and US-centric growth stocks — precisely the rotation already underway.\n\nOn the political front, a strong majority of fund managers expect the 2026 US midterm elections to produce a split Congress — Democratic House with a Republican Senate. This is the classic gridlock scenario, which markets typically view as benign for equities (less policy uncertainty, lower risk of radical fiscal changes). However, the implication is also that the current administration's policy agenda — particularly around tariffs, deregulation, and fiscal expansion — would face meaningful legislative friction in the back half of 2026. Notably, \"trade war\" has virtually disappeared as a perceived tail risk, suggesting that either tariff concerns have been priced in or that markets expect a divided Congress to constrain further escalation.\n\nThe most striking policy-adjacent finding from the FMS is the growing discomfort with corporate capital allocation, specifically around AI-related investment. A record number of fund managers now believe companies are \"overinvesting\" — spending too much on capex relative to what the expected returns justify. This is a meaningful shift: the same community that was enthusiastically funding the AI capex narrative just quarters ago is now explicitly calling for companies to prioritize balance sheet improvement and shareholder returns over incremental spending. CIOs are telling CEOs to slow down. This has direct implications for the hyperscaler trade and the broader AI supply chain — if the buy-side consensus is that capex has overshot, it creates a policy-like constraint on future spending growth even without regulatory intervention.\n\nRelatedly, the tail risk hierarchy has shifted. \"AI bubble\" now tops the list as the single biggest perceived tail risk, ahead of inflation and disorderly bond yield rises. Fund managers are nearly evenly split on whether AI stocks are actually in a bubble — maximum uncertainty. Meanwhile, the most likely source of a credit event is now seen as private equity/private credit, followed by AI hyperscaler capex itself. This is a coherent — if uncomfortable — narrative: the market's own capital allocation decisions (pouring money into private credit and AI infrastructure) are now viewed as the most likely sources of systemic stress.\n\nThe positioning signals reinforce the unease beneath the bullish surface. \"Long Gold\" is by far the most crowded trade, a classic safe-haven and inflation-hedge positioning that sits uncomfortably alongside the \"no landing\" optimism. \"Long Magnificent 7\" has dropped dramatically as a crowded-trade concern, consistent with the de-grossing visible in mega-cap tech underperformance. \"Short USD\" has emerged as a notable crowded position, reflecting the consensus view that the dollar's structural bull market may have peaked. Fund managers strongly favor Value over Growth and Quality over the rest, while expecting small caps to outperform large caps — a style tilt that is essentially a bet on the broadening of economic activity away from the mega-cap tech complex.\n\nThe BofA Cash Rule and Bull & Bear Indicator are both flashing \"sell\" signals, a condition that has historically preceded periods of elevated downside risk for global equities. With cash at near-record lows, sentiment at multi-year highs, and the market's own participants flagging AI overinvestment and private credit stress as the primary vulnerabilities, the policy environment can be summarized as follows: the macro backdrop remains supportive, but the market has priced in perfection, and the very sectors and strategies that drove the rally are now the consensus source of risk. The key question for the months ahead is whether the fundamental earnings trajectory — particularly the back-half 2026 acceleration — can validate the optimism, or whether the contrarian sell signals prove prescient.\n\nSubscribe\n\n Open this more visual friendly version in a new tab/点击跳转查看原文,左上角切换中文 \n\n# 202601\n\n## Market Narrative\n\n### Macro\n\nJanuary painted a picture of near-perfection across global markets — then quietly nailed a row of warning signs just outside the frame.\n\nThe S&P 500's Q4 earnings season delivered a respectable showing. Blended earnings growth came in at 11.9% year-over-year, marking the fifth consecutive quarter of double-digit expansion — a streak not seen since the late 2017 to late 2018 stretch. More striking still, S&P 500 net profit margins touched 13.2%, a new all-time high since FactSet began tracking the metric in 2009, with Information Technology leading at 29.0%. Analysts remain firmly bullish on what lies ahead: full-year 2026 earnings growth is projected at 14.3%, with all four quarters expected to sustain double-digit gains.\n\nYet fund managers appear far more euphoric than the underlying fundamentals would warrant. BofA's January Global Fund Manager Survey painted the most aggressive sentiment picture since July 2021: the FMS investor sentiment composite index surged from 7.3 to 8.1; global growth expectations hit their highest since Jul'21, with a net 38% anticipating a stronger economy; and profit expectations likewise climbed to their most optimistic since Jul'21.\n\nThe most notable narrative shift? For the first time in three years, \"no landing\" seized the top spot as investors' base case, capturing 49% of respondents — overtaking the previously dominant \"soft landing\" scenario at 44%. Only 9% expected a recession, the lowest reading since early 2022. Keep in mind: as recently as April 2025, 69% were still bracing for one.\n\nThe sheer velocity of that narrative reversal is itself worth paying attention to.\n\n### Policy\n\nLiquidity remains the foundation propping up this entire optimistic narrative. A net 66% of FMS investors view liquidity conditions as favorable — the best reading since Sep'21 — a direct consequence of the sweeping global rate-cutting cycle over the past two years.\n\nBut atop that foundation, leverage has been stacked to an uncomfortable height. Cash levels have fallen to a record 3.2%, and BofA's cash rule has triggered an explicit sell signal. The Bull & Bear Indicator has climbed to 9.4, an overbought level that similarly flashes as a contrarian warning. Risk appetite sits at a four-year high. Meanwhile, a net 48% of investors — the most in eight years — report having no downside protection on equities whatsoever.\n\nJanuary's most intriguing structural shift showed up in the \"most crowded trade\" rankings. \"Long gold\" surged to a commanding 51%, dethroning the previously dominant \"long Magnificent 7\" for the first time in four months — the latter plunging from 54% to just 27%. This wasn't because investors turned cautious. Quite the opposite: they were piling into an asset that doubles as both a safe haven and one that 45% of them already consider overvalued. Gold, for its part, reached a record $4,671/oz during the same period.\n\nAt the same time, geopolitical conflict overtook \"AI bubble\" as the number-one tail risk for the first time since October 2024, at 28% versus 27%. Investors were also beginning to position around the 2026 U.S. midterm elections — with 60% expecting a split government, Democrats taking the House and Republicans holding the Senate.\n\nTaken together, January's picture is this: economic data remains solid, earnings momentum stays healthy, but positioning and sentiment have sprinted well ahead of fundamentals. BofA's recommendation is blunt — add hedges, lean into defensive assets. Of course, these kinds of \"contrarian signals amid peak euphoria\" have appeared before without an immediate pullback; timing remains the hardest call in markets. But one thing is certain: when nearly everyone has forgotten risk exists, risk itself doesn't simply vanish.\n\nSubscribe\n\n Open this more visual friendly version in a new tab/点击跳转查看原文,左上角切换中文 ",
  "title": "2026 Global DM Monthly Recap",
  "updatedAt": "2026-03-02T07:32:58.095Z"
}