Please see below article received from Brooks Macdonald this afternoon.
What has happened?
Tuesday’s software sell-off broadened into a wider tech decline yesterday, with concerns around AI disruption dragging the NASDAQ (-1.51%) and the Mag 7 (-1.75%) lower and pulling the S&P 500 (-0.51%) into a second consecutive day of losses. The rotation out of large-cap tech continued to benefit the rest of the market, however. The equal‑weighted S&P 500 (+0.88%) closed at a record high, as did Europe’s STOXX 600 (+0.03%). Beneath the headline weakness, market breadth was remarkably strong, with 363 S&P 500 constituents advancing, the most in two weeks. Energy stocks (+2.25%) outperformed as Brent crude rose +3.16% amid renewed concerns over US‑Iran tensions. One notable outlier was silver, which fell -14%.
Cracks showing in the tech narrative
Weakness was most pronounced in semiconductors. AMD fell -17.31% after issuing guidance that disappointed investors, its worst single-day performance since 2017. That pressure cascaded across the sector, driving the Philadelphia Semiconductor Index down -4.36%, including a -3.41% drop for Nvidia. The developments reinforced the recent narrative of tech vulnerability following months of elevated expectations. On a more positive note, Alphabet reported a solid top-line beat after close, with Google Cloud revenue up 48% to $17.7bn in Q4 (vs. $16.2bn expected). But the market reaction centred on the company’s sharply higher investment plans: CAPEX is now projected at $175–185bn for 2026, more than double 2025 levels and significantly above consensus expectations of $120bn. Alphabet shares swung in after-hours trading—down as much as -7% at one point—before stabilising near flat after a -2% decline during the session.
US economic signals remain steady but inflation risks linger
US macro data continued to indicate stable underlying momentum. The ISM services index rose to 53.8 in January (vs. 53.5 expected), its strongest reading since late 2024. However, the details were mixed: new orders (53.1 vs. 56.5 expected) and employment (50.3 vs. 51.7 expected) softened, while the prices paid component climbed to 66.6 (vs. 65.0 expected). Given its historical correlation with inflation trends, this uptick raised some concern around the disinflation trajectory. Meanwhile, the ADP report showed private payrolls rising by 22k in January (vs. 45k expected), alongside modest revisions to prior months. The official jobs report (typically released the same week) has been delayed by the partial government shutdown, with the BLS now set to publish it on Wednesday next week.
What does Brooks Macdonald think?
We see a sharply diverging narrative emerging. Large-cap tech is experiencing a meaningful squeeze as markets reassess the idea that everyone will be long-term winners from AI. The environment is shifting toward a more selective landscape, where competitive advantage and capital discipline may increasingly drive performance dispersion. Yet despite the tech correction, broader equity indices have remained comparatively resilient, supported by solid market breadth and ongoing rotation into cyclicals and energy. Today’s focus turns to monetary policy. The ECB is widely expected to keep the deposit rate unchanged at 2%. However, heightened geopolitical uncertainty could bring a more dovish tone. In the UK, the Bank of England is also expected to hold Bank Rate at 3.75%. Domestic political noise has added an additional layer of uncertainty, with 10yr gilts rising +2.9bps yesterday against the broader global trend amid speculation around pressure on PM Starmer following the handling of the Peter Mandelson story.
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World GBP | 0.32% | 0.18% | 0.94% | 1.35% | |
| MSCI UK GBP | 1.15% | 1.96% | 4.07% | 4.28% | |
| MSCI USA GBP | 0.87% | 0.46% | 0.07% | 0.23% | |
| MSCI EMU GBP | 0.76% | 0.55% | 1.99% | 2.81% | |
| MSCI AC Asia Pacific ex Japan GBP | -2.11% | -0.52% | 1.99% | 3.73% | |
| MSCI Japan GBP | -1.46% | -1.20% | 3.05% | 3.07% | |
| MSCI Emerging Markets GBP | -1.88% | -0.81% | 3.04% | 4.81% | |
| Bloomberg Sterling Gilts GBP | 0.12% | -0.14% | 0.39% | -0.04% | |
| Bloomberg Sterling Corps GBP | 0.09% | -0.03% | 0.58% | 0.33% | |
| WTI Oil GBP | -4.37% | 2.70% | 6.85% | 6.57% | |
| Dollar per Sterling | -0.15% | -0.10% | 1.56% | 1.42% | |
| Euro per Sterling | 0.36% | 0.66% | 0.93% | 1.04% | |
| MSCI PIMFA Income GBP | 0.53% | 0.63% | 1.90% | 1.95% | |
| MSCI PIMFA Balanced GBP | 0.57% | 0.66% | 1.92% | 2.00% | |
| MSCI PIMFA Growth GBP | 0.66% | 0.74% | 2.01% | 2.13% | |
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World USD | -0.04% | -0.03% | 2.41% | 2.92% | |
| MSCI UK USD | 0.79% | 1.76% | 5.60% | 5.90% | |
| MSCI USA USD | 0.51% | 0.26% | 1.54% | 1.78% | |
| MSCI EMU USD | 0.40% | 0.35% | 3.48% | 4.40% | |
| MSCI AC Asia Pacific ex Japan USD | -2.46% | -0.73% | 3.48% | 5.34% | |
| MSCI Japan USD | -1.81% | -1.41% | 4.56% | 4.66% | |
| MSCI Emerging Markets USD | -2.23% | -1.01% | 4.55% | 6.43% | |
| Bloomberg Sterling Gilts USD | -0.57% | -0.72% | 1.34% | 1.28% | |
| Bloomberg Sterling Corps USD | -0.61% | -0.62% | 1.53% | 1.64% | |
| WTI Oil USD | -4.71% | 2.49% | 8.41% | 8.22% | |
| Dollar per Sterling | -0.15% | -0.10% | 1.56% | 1.42% | |
| Euro per Sterling | 0.36% | 0.66% | 0.93% | 1.04% | |
| MSCI PIMFA Income USD | 0.17% | 0.42% | 3.39% | 3.52% | |
| MSCI PIMFA Balanced USD | 0.21% | 0.45% | 3.42% | 3.58% | |
| MSCI PIMFA Growth USD | 0.30% | 0.54% | 3.51% | 3.71% | |
| Index | 1 Day | 1 Week | 1 Month | YTD |
Bloomberg as at 03/02/2026. TR denotes Net Total Return.
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Chloe
05/02/2026