đFebruary 2026 Market Strategy
Overall risk appetite remains strong. Fears about inflation and rising bond yields are misguided. Deflationary risk factors are underappreciated. Watch out for fiscal seasonality in the next 2 months.
In my January 2026 Market Strategy, I highlighted that the strong performance of the US economy was raising overall growth expectations. Investors loved equities, especially those giving them cyclical exposure. They were capitulating on bonds and reduced their cash allocation to unprecedented levels. I feared that this risk appetite was too strong. Letâs see how the picture has evolved since then.
TLDR Summary
Many investors are unfazed by the latest correction in many of the leading assets of this bull market. Risk appetite remains strong as a combination of cyclical optimism, monetary policy optimism and AI innovation optimism. Falling prices are mostly met with BTFD excitement, not with concerns about a bigger downside move.
Investors continue to fear inflation and rising bond yields, both of which are in my opinion not relevant risk factors. Iâm more concerned about fiscal liquidity potentially dragging down the economy and the stock market. Iâm also concerned that the âAI will disrupt white collar jobsâ narrative will gain traction. This could then have negative effects on consumer confidence and ultimately corporate earnings.
Fiscal flow seasonality will be very pronounced in the coming eight weeks with a market bottom potentially forming in mid-April.
