The sectoral rotation we noted last week remains firmly in play across U.S. markets. Investors continue to sell into potential losers from AI disruption, while struggling to identify the next likely winners.
On the macroeconomic front, the labor market data offered mixed signals. Full-year 2025 job creation figures were sharply revised downwards, suggesting a less dynamic market than initially expected. Conversely, January payrolls exceeded forecasts, highlighting underlying resilience. It was not until Friday’s release of the Consumer Price Index that markets found some relief: inflation dropped 0.3 percentage points to 2.4% year-on-year, below the 2.5% forecast, reinforcing expectations that the Federal Reserve may have room to cut rates.
Analysts note that the combination of sector rotation, AI-related uncertainty, and mixed macroeconomic indicators suggests that investors should remain cautious, balancing exposure across growth-sensitive and defensive sectors.