Investment Playbook
The Oglethorpe Collective · For TOC-23 Employees
Generated February 16, 2026 at 11:16 AM
◉ MID CYCLE
1. Massive AI-Driven Software Stock Selloff Creates Historic Market Disruption
Software companies experienced a devastating $2 trillion market cap wipeout in February 2026 as artificial intelligence disruption fears reached a fever pitch. The S&P North American software index suffered its biggest monthly decline since October 2008, falling 15% in January with ServiceNow tumbling nearly 28% year-to-date and Salesforce declining almost 26%. The catalyst was Anthropic's release of new legal, finance and product marketing capabilities for its Claude Cowork productivity tool, which intensified investor concerns that AI agents could replace traditional software subscriptions.
Implications: This represents a fundamental shift in how markets value software companies, moving from premium valuations based on recurring revenue models to discounts reflecting disruption risk. While some analysts believe the selloff is overdone and creates buying opportunities, the fear reflects legitimate concerns about AI's potential to compress margins and eliminate jobs across knowledge work sectors. Companies must now prove AI enhances rather than replaces their offerings to regain investor confidence.
2. Historic "Great Rotation" From Growth to Value Reshapes Market Leadership
January 2026 marked a watershed moment as small-cap stocks dramatically outperformed mega-caps, with the Russell 2000 surging 5.39% while achieving a remarkable 15-session winning streak against the S&P 500 - the longest period of small-cap dominance since May 1996. Small-cap earnings are projected to grow 17-22% versus 14% for large-caps in 2026. The combined market capitalization of the top ten U.S. companies fell from a record $26.0 trillion to $24.9 trillion by mid-January, while Basic Materials surged 9.05% and Consumer Defensives climbed 5.9% year-to-date.
Implications: This rotation signals a potential end to the narrow, tech-driven bull market that has dominated since 2023. The shift toward value stocks and smaller companies suggests investors are seeking broader diversification and preparing for a more balanced economic recovery. The 31% valuation discount for small-caps relative to large-caps presents compelling opportunities, particularly as domestic-focused companies benefit from policy support and falling interest rates.
3. Mixed Economic Data Creates Federal Reserve Policy Uncertainty
Consumer price index data for January came in at 2.4% year-over-year versus expectations of 2.5%, while the monthly reading showed a 0.2% increase against forecasts of 0.3%. Meanwhile, January nonfarm payrolls significantly exceeded expectations at 130,000 new jobs versus the 55,000 consensus forecast. The cooler inflation data spurred bets on Federal Reserve rate cuts, with Treasury two-year yields dropping to their lowest level since 2022 as traders priced in higher chances the Fed will slash rates more than twice this year.
Implications: The conflicting signals from inflation and employment data create a complex environment for Fed policy decisions. While lower inflation supports the case for rate cuts, stronger-than-expected job growth could keep the Fed cautious about aggressive easing. This uncertainty benefits rate-sensitive sectors like small-caps and financials in the near term, but creates volatility as markets try to price in the Fed's next moves. Investors should prepare for continued data-dependent policy shifts throughout 2026.
Source: Claude API with web search · February 16, 2026
Source: Claude API with web search · February 16, 2026
| Asset Class | Proxy | YTD | 1Y | 3Y | 5Y | P/E | Yield |
|---|---|---|---|---|---|---|---|
| Cash | BIL | 0.4% | 4.1% | 15.0% | 17.0% | — | 4.12% |
| ST Bonds | SHY | 0.5% | 5.2% | 13.9% | 9.1% | — | 3.8% |
| Muni Bond | MUB | 1.2% | 4.9% | 10.3% | 4.6% | — | 3.12% |
| Muni High Yield | HYD | 0.5% | 3.2% | 11.6% | -0.5% | — | 4.28% |
| For. Dev. Bond | BNDX | 1.3% | 3.4% | 14.7% | 0.9% | — | 4.38% |
| HY Bond | HYG | 0.7% | 7.5% | 28.1% | 20.8% | — | 5.69% |
| EM Bond | EMB | 1.6% | 13.0% | 31.6% | 9.1% | — | 4.96% |
| Bank Loans | BKLN | -1.3% | 5.1% | 24.3% | 27.5% | — | 6.96% |
| Long Term UST | TLT | 3.5% | 5.7% | -3.3% | -29.3% | — | 4.43% |
| US Equity (LC) | SPY | -0.2% | 13.1% | 74.2% | 87.1% | 27.45 | 1.05% |
| US Equity (SC) | IWM | 5.7% | 17.6% | 43.8% | 22.4% | 18.97 | 98.0% |
| Int'l Dev. Equity | EFA | 7.4% | 32.0% | 61.8% | 61.0% | 19.63 | 3.22% |
| EM Equity | EEM | 8.7% | 42.0% | 62.2% | 20.6% | 16.48 | 2.05% |
| Real Estate | VNQ | 6.9% | 6.8% | 19.0% | 28.1% | 33.42 | 3.82% |
| Midstream Energy | AMLP | 10.4% | 8.3% | 65.7% | 176.9% | 15.11 | 7.86% |
| Commod. Fut. | DJP | 8.1% | 16.3% | 26.6% | 71.4% | — | — |
| Global Infrastructure | IGF | 10.3% | 29.9% | 59.6% | 79.2% | 21.63 | 3.07% |
| HFs Equity Hedge | QAI | 2.6% | 9.3% | 27.9% | 17.2% | — | 1.47% |
| HFs Event-Driven | PSR | 8.8% | 8.3% | 13.5% | 25.0% | — | 2.5% |
| HFs Relative Value | FLOT | 0.5% | 4.8% | 18.5% | 21.3% | — | 4.82% |
| HFs Macro | DBMF | 7.9% | 20.8% | 23.5% | 55.8% | — | 5.71% |
| Private Equity | PSP | -6.3% | -3.8% | 42.4% | 16.9% | — | 5.82% |
| HFs Multi-Strat | GMOM | 10.1% | 27.6% | 42.7% | 55.4% | — | 2.8% |
| Private Credit | ARCC | -5.2% | -8.2% | 29.7% | 70.7% | — | 9.91% |
* CMA Estimate · P/E shown for equity classes only
Each dot = one asset class. Higher and left = better risk-adjusted return. Hover for details.
Bars = realized distributions (DPI). Dots = total value (TVPI). Gap = unrealized value (RVPI). Hover for IRR.
Sources: Cambridge Associates Global PE Index & US VC Index, June 30, 2025
The Conference Board Leading Economic Index® (LEI) for the US declined by 0.3% in November 2025 to 97.9 (2016=100), after declining by 0.1% in October to 98.2, down from 98.3 in September. Overall, the LEI fell by 1.2% over the six months between May and November 2025, which annualized equals approximately -2.4%.
The next release will be on February 19th, 2026 at 10:00 AM ET. Throughout 2025, weak consumer expectations led the decline in the LEI, followed by new orders. The strongest positive contributions came from labor market data, like initial claims for unemployment insurance and weekly hours worked in manufacturing.
Source: IMF WEO, Goldman Sachs, ECB, BOJ projections
| Economy | Phase | Direction | GDP (2026E) | Inflation | Key Signal |
|---|---|---|---|---|---|
| United States | Mid-Cycle | Improving | 2.4–2.6% | Tariff-driven but decelerating | AI investment driving growth |
| China | Late-Cycle | Stable | 4.6–4.8% | GDP deflator below 0% | Strong exports offsetting weak domestic demand |
| Euro Area | Late-Cycle | Deteriorating | 1.2–1.3% | Accommodative ECB holding at 2.0% | Structural weaknesses and China competition |
| Japan | Early-Cycle | Improving | 0.9–1.0% | 2.1%, falling below 2% in H1 | Virtuous wage-price cycle emerging |
| United Kingdom | Late-Cycle | Deteriorating | 1.0–1.4% | Falling to 2% target by spring | Rising unemployment to 5.3% |
| Emerging Markets | Mid-Cycle | Improving | India 6.7%, varied by region | Stronger macro frameworks | Outperforming advanced economies |
Maximizes expected log growth incorporating skewness and kurtosis from TOC-23 CMAs. After-tax: 37%+3.8% NIIT ordinary, 20%+3.8% LTCG, munis exempt. Constraints: min 10% US equity, 5% munis, 2% cash; max 20% illiquids.
10,000 paths using geometric Brownian motion. $50M initial. Shaded = 10th-90th percentile.
Each point represents one of the five optimized portfolios. The curve shows the risk-return tradeoff.
Equal-weighted, rebalanced Dec 31 · MSFT, NVDA, AVGO, NOW, MRVL, ADBE, GOOGL, META, AMZN, MSCI, ICE, CBOE, JPM, PNC, MA, V, KKR, SCHW, TDG, GE
| Ticker | 1Y | Sector |
|---|---|---|
| GOOGL | +64.9% | Communication Services |
| GE | +52.2% | Industrials |
| AVGO | +39.1% | Technology |
| NVDA | +35.2% | Technology |
| CBOE | +32.9% | Financial Services |
| Ticker | 1Y | Sector |
|---|---|---|
| AMZN | -13.7% | Consumer Cyclical |
| MRVL | -23.8% | Technology |
| KKR | -26.6% | Financial Services |
| ADBE | -42.5% | Technology |
| NOW | -45.9% | Technology |
Equal-weighted, rebalanced Dec 31 · IAU, AEM, GFI, NEM, KO, PG, MCD, KR, COST, WMT, TJX, LLY, DHR, CVS, CCI, VZ, PM, MO, AES, AEP
| Ticker | 1Y | Sector |
|---|---|---|
| GFI | +186.9% | Basic Materials |
| NEM | +167.9% | Basic Materials |
| AEM | +117.6% | Basic Materials |
| IAU | +71.4% | N/A |
| AES | +69.7% | Utilities |
| Ticker | 1Y | Sector |
|---|---|---|
| MCD | +8.1% | Consumer Cyclical |
| CCI | +5.8% | Real Estate |
| DHR | +5.1% | Healthcare |
| PG | -3.8% | Consumer Defensive |
| COST | -4.9% | Consumer Defensive |
Source: Yahoo Finance · Equal-weighted, rebalanced annually Dec 31
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