Tactical Changes February 2026

Hello Friends!

 Six weeks into the new year, market volatility has investors on notice. Substantial pullbacks in headline-grabbing asset classes like digital currencies and precious metals, along with downturns in some of the biggest and most widely followed stocks, are raising questions about where the economy is headed and what it means for equity markets.

Much of last year’s market performance was driven by the explosion of the AI industry, led by massive investments into the space by leading tech companies. Coming out of this recent earnings season, investors are gauging whether AI infrastructure investments are likely to accelerate or decelerate, and where the next major impact will be felt as the AI economy moves forward. So far, there appears to be some skepticism that big tech companies can justify the return on investment and continue deploying increasingly huge sums of money into AI, along with a renewed assessment of the likely winners and losers as the evolution of AI progresses. For the broader economy, the question is how important AI is likely to be to economic growth, and whether it can fuel earnings growth for companies in the aggregate. Still, macro currents such as unemployment and inflation will have their say in the matter as well.

The January jobs report was delayed due to budget battles in Washington, but confidence isn’t necessarily high, as over 100,000 layoffs were announced by public companies last month—more than double the year before. This, along with decreasing consumer confidence numbers, explains nervousness about future economic growth. Still, the Federal Reserve has some powder in the tank and can lower interest rates, provided inflation doesn’t persist as a problem. That said, the announcement of the next chairman of the Fed was met by some perplexity, as the policy history of the new nominee is not quite in sync with what the administration has expressed in its expectations of a Fed chief. As a result, Fed policy remains murky, although bonds have notably rallied of late, reversing a recent spike in bond rates.

Now, couple the acute uncertainty around AI’s economic impact and Federal Reserve direction with political turmoil that doesn’t appear to be lessening, both domestically and internationally, and it would appear that all possibilities for the economy and markets are still in play. We could see a recession of varying severity, a K-shaped economy that works for some and fails for others, or another year of solid corporate earnings growth—maybe with significant sector rotation, maybe not. This reinforces the current volatile nature of things, while perhaps validating our momentum-centered approach to portfolio modeling and long-term focus on planning.

There were two tactical rotations in Provizr portfolios in February. In the Specialty Bond rotation, High Yield bonds move back into favor as rising bond rates are somewhat subdued. And in the Equity Sector rotation, the Energy sector gets the nod, replacing Consumer Discretionary. Geopolitical events, rising demand from AI infrastructure growth, and sector rotation from value hunting have all potentially contributed to increased momentum. So sit back and relax knowing Provizr is working for you! 😊

Alan Brilliant

Co-Founder, Provizr

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