Key Events: Solid data amidst creative destruction fear
Last week’s U.S. economic data included a better than expected jobs report and more benign inflation data than the market had anticipated. A ‘double beat’ in key data series suggesting stronger growth and weaker inflation would normally support a robust response from equities.
Major U.S. market indices finished in the red for the week due to ongoing fears regarding the potential for creative destruction of jobs and the future profitability of many of today’s leading technology enterprises.
Market Review: International markets lead the way
International equities continued to surge last week with broad participation from emerging markets leading the way. Ongoing rotation away from last year’s leading growth stocks was evident globally as value and dividend related equities benefit from fund flows.
The aggregate bond market performed admirably for the week as yields fell, but spread widening blunted the enthusiasm for high yield bonds.
Outlook: Virtues of broad diversification endure
The major indices headline returns for U.S. equities masked a far more acceptable result for the broader S&P 500. The Equal Weight S&P 500 index delivered a modest positive return last week driven by strong returns from Utilities, Materials, Real Estate and Energy. Financials and technology related sectors were distinctly negative.
The Equal Weight index closed at an all-time on Wednesday and responded quite favorably to the mild inflation report Friday morning following Thursday’s broad sell-off. The Bloomberg Mag-7 sold off further on Friday and ended the week 3.2% lower.1 The Mag-7 has reversed course and overwhelmingly restrained the S&P 500 this year.
Over time the market functions as a long-term discounting mechanism, but it can be vulnerable to exaggerated expectations and herd behavior. The concentration risk we discussed throughout 2025 has finally begun to exact a toll on the mega-cap tech stocks and the virtues of broad diversification are proving to be of paramount importance as depicted in this week’s graphic.
The chart illustrates the merits of diversification within the S&P 500, but the benefits extend across market cap, geography and style as exposure to mid and small-caps, international and value stocks has become essential once again. Given the profound impact of large cap growth in the S&P 500 and most investor’s portfolios over the last decade, the magnitude of this rotation may prove to be far more powerful and enduring than most onlookers appreciate today.
S&P 500 Equal Weight Highlights Virtues of Diversification
OneAscent Navigator Outlook: February 2026
This material is intended to be educational in nature , and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
Source: Bloomberg data.
Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggregate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
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