Premium"A Wild F**king Month..."
February was a tale of two cities with historic Goliaths getting David'd (if that's a word) day after day (from SaaS to CRE brokers and from BDCs to Financials as AI disruption rippled through stocks - and doesn't look like slowing, speculative leverage was exsanguinated from precious metals and crypto, and credit finally started to crack).
One veteran cross-asset-class macro trader at a very large fund MSG'd us "...ready for a beer or five, that was a wild f**king month..." this afternoon, and we felt the same as we tried to sum up the chaos.
Before we dive in, we give the floor to top Goldman Sachs trader Brian Garrett who dropped a note this afternoon that summed shit up nicely... we haven't seen this since 2008!
Realized dispersion has been the topic of 2026...
Stocks have decoupled from the stock market at a magnitude not seen in decades.
For investors hoping for equity trading patterns to “go back to normal” and act more like the index… the vol market has some unfortunate news.
From now thru year end (~210 sessions) the implied vol spread of the avg single stock vs the index is ~18 vol points.
This implied volatility spread is the largest since october 2008 … peak of financial crisis (VIX ~80).
This is a great environment for equity stock pickers / active management / alpha long short strategies
So, on that 'optimistic note, let's get down to business...
Top down, February saw the anti-goldilocks narrative play out in macro data with inflation surprising to the upside while growth surprised to the downside...
STIRs focus on the latter (weaker growth) and shrugged off the former (higher inflation) with rate-cut expectations notably higher on the month...
US stocks are trading lower today to end with only a modest loss for the month of February (S&P 500) as investors have been positioning around elevated volatility in Tech, Financials, and anything tied to the AI disruption trade, alongside continued momentum in pro-cyclical stocks as US economic data remains firm.
Trannies topped the month as HALO - Heavy Asset, Low Obsolescence - names outperformed, Nasdaq lagged as Software was slammed (and AI came off the highs) while the S&P, Dow, and Small Caps ended around unch-ish...
The Dow was set to break a nine-month win streak (Dow closed January at 48892) but the algos battled very hard to avoid that...
The S&P was stuck all month below a wall of gamma with Bloomberg macro strategist, Michael Ball, noting that option positioning keeps supporting the edges of the range for the SPX.
SpotGamma’s pivot is back at 6,900, with positive gamma resistance increasing above the 6,950 level, while downside support remains around 6,800, although the negative gamma backdrop there is more fluid. They go on to say that 0DTE straddle pricing still looks cheap versus the realized swings traders have been living with, while skew is historically high. That’s not only due to elevated downside protection demand but abundant upside call supply.
That’s the new regime.
Dispersion keeps index vol contained, but single names and sectors are still taking hits as AI-disruption, credit cockroach and Fed-easing angst keeps a changing daily whack-a-mole of targets being hit.
That leaves rallies fading into overhead positive gamma, while downside momentum can pick up fast as the S&P 500 slides toward 6,800 and dealer hedging turns into a chase.
But somewhat miraculously it’s still not time to panic.
Under the hood it was a different story... a major divergence between Tech, Financials, and Discretionary as the biggest losers and Utes, Energy, and Materials which outperformed...
Diving a little deeper...
Defensives massively outperformed Cyclicals...
Mag7 stocks massively underperformed the S&P 493...
Semis outperformed...
...continuing to crush Software...
HALO stocks rallied...
SaaS puked for the second month in a row (with every BTFD effort slammed back down)...
AI Beneficiaries massively outperformed AI-at-Risk names in February. In fact this is the best monthly relative gain since May 2023...
Financials were proper fucked as credit fears rippled through (as did AI disruption fears for some). Today saw rate-sensitive financials suffer their biggest drop since Liberation Day...
While VIX did rise in February (back at 21), the skew soared to its highest since Oct 2025 (as hedgers piled into downside protection)...
But, before we leave equity-land, Goldman's Chris Hussey cuts to the bottom-line:
Investors are finally giving more value to old world capital intensive businesses. That demand is now extending beyond just those investing in hard data center assets to other slices of the supply chain and the economy. Why? The old adage that you buy the shovel makers in a gold rush is at least part of the answer, of course.
And as Goldman's Oppenheimer puts it: for the first time since the internet's commercialization a quarter-century ago, future technology growth prospects are increasingly dependent on physical assets like data centers and energy supplies. Drilling down on this opportunity, we identify the best HALO businesses that pair substantial physical capital (barriers to replication via cost, regulation, time to build or engineering complexity) with long-lived economic relevance, including:
electricity grids,
pipelines,
utilities,
transport infrastructure,
critical machinery and
long cycle industrial capacity.
The hard asset trade got a further boost from a change to US tariff policy on the back of the Supreme Court ruling.
US tariff policy is in flux now but Goldman's initial forecast is that the new rules should cut about 100 bp off the effective US tariff rate.
The flip side of this hard asset trade is of course soft assets like software, media, consultants and even pockets of the financials sector.
In February, Software and IT services stocks sold off again with stocks like INTU, WDAY, IBM, and ACN all losing 20% or more of their value this month alone. The concern is that AI will disintermediate these businesses or at least pave the way for low cost competition that will impair the business models. But Goldman's Gabriela Borges highlights how not all software company business models are built the same way. The agentic technology ecosystem is rapidly evolving, which makes it challenging to assess terminal values and put a floor to valuations. But Goldman thinks you can still focus on companies that can prove that their historical experience can drive higher quality agentic outcomes, and stable to improving fundamentals through earnings in the coming AI era. Which software stocks have the best moats today? Focus on: CRWD, GWRE, KVYO, MDB, NET, NOW, RBRK, SHOP, and SNOW.
Credit markets took a very notable turn for the worse in February...
...with credit risk notably decoupling from equity risk in the last few days...
... with IG Tech spreads at their wides relative to the IG market since 2007...
...and HY Tech spreads blowing up...
Treasury yields tumbled in February led by the belly of the curve as 'safe' haven flows (and weaker growth) dominated any inflation fears...
With the 10Y Yield breaking down below 4.00% for the first time since October...
Interestingly - and unusually - bonds AND commodities rallied in February...
It was a choppy month for commodities with some serious pain early on in PMs (China specs rug pull), but they all end the month in the green with silver up 10% (it was down over 20% early in the month). That was gold's 7th month's gain in a row and Silver's 10th winning month in a row...
Amid all the chaos, the dollar ended basically unchanged...
Crypto was ugly with Bitcoin falling for the 5th straight month and Ethereum underperforming. If you're looking for a half-full glass, the liquidation in the first week seems to have stalled and the entiure crypto ecosystem stabilize a little in the last week (since Jane Street got fingered)...
Oil ended higher for the second month in a row at six month highs amid US-Iran tensions jolting geopolitical risk premia...
Finally, ever the optimistics, we note that while pockets of the market were dominated by the AI disruption trade in February, other parts of the market were dominated by the cyclical recovery trade as the ISM Manufacturing Index punched well above 50.
Earnings estimates across the globe are inflecting positively and especially in Emerging Markets...
The inflection partly reflects the increased demand for hard assets that is carrying over to the earnings of a host of companies involved in the data center supply chain and beyond.
