February 7, 2026 Market Update

Market Recap: You Going to Spend How Much?!

Equity markets navigated a volatile week to end roughly flat, as the Dow climbed to a record 50,000 while growth-oriented equities bore the brunt of the pullback.  Technology stocks were especially hard hit as earnings reports from several AI-related companies outlined aggressive investment plans, leaving analysts and investors questioning if and when those massive expenditures will translate into sustainable earnings growth.

Bond prices benefited from the stock market’s woes, as prices rose and yields fell on softer economic data and increased demand for safety.  The decline in rates reflected growing confidence that inflation pressures are easing, while also signaling greater investor caution about the broader macro picture.  Lower yields provided some offset for risk assets, but not enough to reverse the broader equity sell-off.

Looking ahead, market stabilization will likely require greater clarity on two fronts: confirmation that economic growth remains resilient, and reassurance that investments in technology can deliver returns that justify their cost.  Until then, investors should expect markets to remain choppy as Mr. Market weighs long-term opportunity against near-term uncertainty and elevated price-to-earnings ratios.

Market Performance.

Market Commentary: Software Sell-off.

The software sector was hit hard this week, leading a broader pullback in growth-oriented equities.  The catalyst appears to have been a growing appreciation for how rapidly artificial intelligence is evolving, raising questions about whether AI-driven applications could eventually make some software products obsolete.

While artificial intelligence will undoubtedly change how software companies create and deliver their products, the extent to which AI displaces software remains uncertain.  Over time, the companies that adapt and execute best will be the ones that generate the earnings needed to earn Mr. Market’s backing.  Those able to incorporate AI into their offerings—rather than compete against it—are likely to survive and, in some cases, prosper.

For investors, last week’s trading once again illustrates that volatility is the price paid for higher returns.  Patience, not panic, is needed for investors hoping to generate greater returns by investing in growth stocks.

In Case You Missed It. Good as Gold.

On August 14, 1971, the Bretton Woods system that pegged gold at $35 an ounce came to an end, setting off a historic multi-year gold rally.  Surprisingly, investing the same amount in the S&P 500[LZ1] [SP2]  the day before the gold rally started with dividends reinvested would have resulted in an investment worth roughly four times the price of gold today.