Since the March 30th low, the S&P 500 index has rallied over 13% to reach a new all-time high. However, it may be time for the market to take a bit of a pause to catch its breath.

Equities are looking a bit extended and are showing signs of exhaustion, at least in the short term.

For example, a bearish divergence is forming in the S&P 500 as the number of stocks above their respective 50 and 200-day moving average is declining while the index continues to rise.

In other words, fewer and fewer stocks are rising as the market rises.

Momentum Is Weakening

The RRG (relative rotation graph) for the broader market is also displaying signs of weakness.

Large, Mid, and Small Cap stocks are all rotating towards the “weakening” quadrant, indicating a loss of upside momentum.

9 of the 11 sectors that make up the S&P 500 are also showing signs of weakness, with only the Energy and Consumer Staples sectors showing improvement:

So is it time to sell everything and head for the hills?

Not necessarily. I think a retest of the previous highs (the 7000 level for the S&P 500), followed by a stagnant summer market, is the more likely scenario.

Don’t Forget About The 4-Year Election Cycle

During midterm election years in the US, stocks tend to consolidate as the November election approaches. Considering the current state of politics in the US, I wouldn’t be surprised if investors take a wait-and-see approach to their portfolios.

For those unfamiliar with the Presidential Cycle, the theory is based on the stock market's historical performance over a 4-year election cycle. Historically, midterm election years (2026) tend to perform the worst, while the pre-election year (2027) tends to perform the best:

The good news for investors: markets have historically rallied in the fourth quarter of midterm years, and the year that follows tends to be even stronger:

In short, this is a moment for patience, not panic. The combination of weakening internals, sector rotation toward defensives, and the historical headwinds of a midterm election year suggests the market may need time to consolidate before its next leg higher.

For now, staying selective and letting the data drive the decisions remains the most sensible way to navigate the months ahead.

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

One morning, Trump signals a diplomatic breakthrough with Iran. The next, he threatens to escalate.

Tariffs are on, then off, then modified. Ceasefire terms are announced, then walked back, then quietly renegotiated.

Washington is running on improvisation. And yet — the stock market has largely stopped reacting.

Are Investors Starting to Look Past Iran?

Bloomberg ran a headline this morning: “Stock Investors Look Past Iran War Despite Shaky Ceasefire.”

On February 28th, the U.S. and Israel launched 900 airstrikes on Iran. The Supreme Leader was killed. The Strait of Hormuz shut down. Oil jumped 55%. The S&P 500 index dropped nearly 8%.

And now? Back to pre-war levels as of yesterday:

The market seems to have stopped caring about Iran.

I spent the past few days pulling together every credible study I could find on how long geopolitical shocks actually move markets.

I wanted a real answer to a simple question: how long does the market actually care?

A research note from RBC stated:

“In 20 major post-Second World War military interventions and hostilities that we evaluated, the S&P 500 fell six percent, on average, from the initial market impact to the trough level.

In 19 of the 20 events, the market took an average of only 28 days to return to where it had been prior to those events.”

Further published institutional research found that:

• On average, Morningstar found that the S&P 500 took 16 days to bottom following past geopolitical shocks.

• LPL Financial studied 26 events over 80 years and found an average of 39 days for the S&P 500 to recover.

• After approximately 40 days, the geopolitical risk premium on equities became statistically indistinguishable from noise, according to the European Central Bank.

The current Iran conflict? 30 trading days from event to recovery. Right in the historical range.

However…

Every study I reviewed makes the same caveat: energy supply disruptions are the exception to the “markets recover quickly” rule.

The reason - energy disruptions have historically been followed by a recession.

James Hamilton at UC San Diego found that 10 of 11 U.S. recessions since 1945 were preceded by oil price spikes.

(Previously, I went into detail about recoveries during a recession here: Five Weeks of Red: What History Says Comes Next)

So on one hand, the market is following the historical post-geopolitical recovery “playbook” almost perfectly.

On the other hand, this conflict involves a sustained disruption to roughly 20% of global oil transit, which is structurally different from every post-WWII geopolitical shock except the 1973 embargo and the 1990 Gulf War.

What Do the Charts Say?

1. Improving momentum

Relative rotation graphs (RRG) are showing increasing momentum and relative strength across numerous areas of the market. Small, mid, and large-cap indices are all improving.

2. The price relationship between oil and the stock market has also changed.

   At the start of the conflict, oil prices went up, and stocks went down.

Now, the relationship (correlation) has changed - indicating that investors are not as worried about the impact current oil prices are having on the S&P 500 index:

3. High-Yield Credit spreads are going back down.

High-Yield Credit spreads are the difference between the yield of a riskier asset class (in this case, high-yield bonds) and a safer benchmark, like US bonds.

As the difference, or spread, gets wider, it is an indication that investors are viewing high-yield bonds as riskier than before. If investors are viewing these bonds as riskier, it may be because they are becoming more worried that economic conditions are starting to deteriorate.

Upcoming Catalysts

While the charts show a stock market that is starting to regain its footing, it is a good idea to keep an eye on potential, upcoming, and near-term catalysts (both good and bad).

1. Earnings season is the first test

Q1 earnings growth is expected at +13.2% year-over-year, the strongest expectation going into any earnings season since Q2 2022. Nine of eleven sectors are projected to be positive, led by Information Technology at +45%. (FactSet, April 2026.)

The real test comes in late April, when Microsoft, Alphabet, Meta, Amazon, and Apple report. These five companies are roughly 25% of the S&P 500.

2. The Fed is Trapped

The Federal Open Market Committee (FOMC) is scheduled to hold a two-day meeting on April 28–29, 2026, and is expected to keep rates unchanged.

What will matter is the language the Fed uses. The market is waiting to hear if the Fed revises, or provides additional insight, on how it plans to handle rising inflation, combined with today’s delicate economy.

The March CPI report showed headline inflation at 3.3% year-over-year. The month-over-month increase was 0.9%, the largest since 1967.

Gasoline jumped 21.2% in a single month and accounted for three-quarters of the increase. (Bureau of Labor Statistics, April 10, 2026.)

3.3% headline inflation with oil above $95 is not a backdrop that invites rate cuts. The March FOMC minutes revealed a willingness to consider rate increases, the most hawkish signal since the hiking cycle ended.

The problem with raising interest rates to combat inflation is that it will further weaken the economy.

Already, consumer sentiment is at a record low:

3. April 30th - Will Q1 GDP Show We Are In A Recession?

The advance estimate of first-quarter GDP arrives on April 30, just two days after the FOMC decision. Q4 2025 was revised down to 0.5%. A negative Q1 print would mean two consecutive quarters of near-zero or negative growth.

4. The Iran Ceasefire

The market has priced in a ceasefire. But the ceasefire is fragile.

Oil is roughly 37-40% above pre-war levels. The Strait of Hormuz, which handles about 20% of global oil transit, remains tightly controlled.

If the ceasefire holds and the Strait reopens, oil prices settle, inflation pressure fades, and the Fed gets room to cut. This is what the market is hoping for.

If talks collapse permanently and the naval blockade escalates, we may see oil surge above $120. At that level, the market may need to start pricing in a recession.

5. Private Credit:

This is the one that keeps me up at night. The private credit market is $1.8 trillion in outstanding loans, and it is showing stress that most retail investors have no idea about.

The U.S. private credit default rate has risen to 5.8% (Fitch Ratings), with direct lending defaults projected to reach 8%.

Why worry about private credit?

JPMorgan estimates that 30% of the $1.8 trillion in private credit loans are to software companies. The same companies that are most at risk from AI disruption.

So the $700 billion in AI capital spending that is supposed to be the bull case for tech may actually be the bear case for private credit.

A Goldman Sachs survey found that 63% of institutional fund managers cite private credit as the most likely source of a systemic event.

For now, as I showed above, credit spreads are normalizing, but it is something that I will be keeping a close eye on.

To Sum Up

The market is not ignoring the risks. It is making a bet.

The bet is that the ceasefire holds, the Strait reopens, oil retreats, inflation cools, and the Fed finds room to breathe.

History says geopolitical shocks fade.

But history also says that when a geopolitical shock comes attached to an energy disruption — the kind that hits 20% of global oil supply — the aftermath tends to look less like a recovery and more like the opening chapter of a recession.

I believe the reason investors are leaning towards an optimistic outcome is due to the mid-term elections.

Voters’ main concerns center around rising costs. An extended conflict that puts oil above $120 per barrel would likely result in significantly higher costs.

I’m willing to bet that Trump is facing tremendous pressure from Republican candidates who are up for reelection this Fall.

The market may have found its most unlikely source of stability: a President who needs gas prices to be lower before November.

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

Five Weeks of Declines

The S&P 500 has fallen for five consecutive weeks since late February. This is the longest weekly losing streak since May 2022, when the index fell seven straight weeks during the inflation-driven bear market.

This decline is being driven by the Iran-U.S. conflict, which shut the Strait of Hormuz and pushed Brent crude towards $115 per barrel, injecting a supply shock into an economy that was already showing cracks.

Five weeks of declines in a row may feel ominous. But what does the historical record actually say?

This Has Happened Before: 31 Times Since 1950

Since 1950, the S&P 500 has experienced 31 completed streaks of five or more consecutive down weeks. That works out to roughly once every 2.4 years. The current decline is actually milder than the historical average of 9.5% for these episodes.

So, what happens during the weeks and months after declines like this?

S&P 500: 5+ Consecutive Down Weeks (1951-2022)

Forward Returns from End of Losing Streak

Complete historical data: all 31 episodes of 5+ consecutive down weeks with forward returns. Source: Yahoo Finance (S&P 500 weekly adjusted close). Recession dates per NBER. ARTAIS Capital Management.

One month later, the average return was +2.4%. Markets stabilize quickly; roughly 68% of instances were positive.

Three months later, the average was +4.3%.

One year later, the average return was +10.1%, with 71% of instances positive and a median return of +10.1%.

The range of outcomes, however, is enormous. The best one-year return was +52.2% (April 1997). The worst was -28.9% (November 1973).

The difference between the best and worst case scenarios? Recessions.

The Recession Question Changes Everything

The single most important variable for forward returns after a five-week losing streak is whether the economy tips into recession.

When these streaks occurred outside of recessions (1962, 1987, 1997, 2004, 2011, 2022), the average one-year forward return was +12.3%, with 81% of episodes producing positive returns. The median was +10.1%. These were buying opportunities.

When they coincided with or preceded recessions (1969, 1973, 2000, 2008), the picture darkened. The average one-year return dropped to +7.9%, but that number is misleading.

The data gets inflated by two massive V-shaped recoveries in 1980 (approximately +34.8%) and 1982 (approximately +41.3%), both of which occurred when the Fed had enormous room to cut rates and did so aggressively.

The worst outcomes (November 1973 at -28.9%, July 2008 at -27.5%, June 1969 at -23.6%) all shared something with today: an external shock combined with a late-cycle economy where the Fed had limited flexibility to cut rates.

What Are The Chances The US Falls Into A Recession?

Oil prices matter here.

In 1990-91, Iraq’s invasion of Kuwait sent oil prices up 112%. The S&P fell 19.9% but recovered within four months after the conflict was resolved.

In 1973-75, the Arab oil embargo sent crude up over 300%, the S&P dropped 48.2%, and it took over seven years to recover to previous highs.

The difference? In 1990, the Fed had room to cut, and the price shock was temporary. In 1973, inflation was already running hot, the Fed had limited flexibility to cut rates, and the supply disruption lasted much longer.

Currently, I am seeing elements of both, which is why the recession question is so contested right now.

I have been tracking the major Wall Street recession probability estimates since the Iran conflict began on February 28. The range is wide, and every revision has gone in one direction: up.

The Bull Case: Why This Could Be 1990, Not 1973

Oil

Iran de-escalation or Strait of Hormuz reopening. Every oil-shock recovery in the past 50 years began with supply normalization.

In 1991, oil fell 30% within weeks of the Gulf War ceasefire. Diplomatic channels remain active. If a ceasefire materializes, the oil premium unwinds rapidly, and with it the recession probability estimates.

Economic and Market Data

While the data is mixed (which is exactly what you would expect at this stage of the debate), there are some good signs.

ISM is still in expansion territory. Manufacturing PMI at 52.4 (February) and Services at 56.1 (February) remain solidly in expansion.

Initial claims for unemployment are still anchored at roughly 210,000 per week, historically low and inconsistent with a recession that has already started. This is the single most real-time labor market indicator, and it is not flashing red yet.

Sentiment is also getting washed out. Some of the strongest one-year returns in the historical record (1953 at +36.3%, 1980 at +34.8%, 1982 at +41.3%) came after positioning had become extremely defensive.

The Fed

Today, the Fed has ammunition. Unlike 1973, when the Fed was already deep into a tightening cycle, today’s fed funds rate gives the Fed meaningful room to cut.

In 1990 and 2001, the market bottom arrived when investors believed the Fed’s next move would be a cut.

Currently, the futures market has priced in no action from the Fed at their next meeting, but the odds are increasing for at least one rate cut by the end of the year.

Listen closely for any shifts in language from the Fed, indicating future rate cuts.

The AI Cycle

Plus, the AI investment cycle is not over. Over $700 billion in AI-related capital expenditure has been committed by major tech firms through 2027.

While spending has slowed somewhat, as CEOs hedge against a macro downturn, it has not stopped. If the oil shock resolves, the AI buildout resumes as the dominant growth driver.

The Bear Case: Why This Could Be Worse Than It Looks

Oil

Oil above $100 is a tax on everything. Goldman Sachs estimates that every $10 increase in oil prices shaves approximately 0.1 percentage points off GDP growth.

With Brent up roughly $35 since the conflict began, that is a 0.35% GDP drag before any second-order effects.

Current Traffic — HORMUZ STRAIT; Source: MarineTraffic.Org

The International Monetary Fund estimates that a 30% oil price increase reduces global GDP by up to 0.5 percentage points. We are well past that threshold. Unlike 1990, when the shock lasted four months, the Strait of Hormuz remains at near-zero traffic with no credible timeline for reopening.

Economic Data

Again, the data is mixed. The February payroll numbers showed that the economy created only 181,000 total jobs in all of 2025. February saw a job loss of 92,000, the third time in five months that the economy lost jobs.

The labor market is not falling off a cliff. It is eroding slowly, which is exactly how the early stages of past recessions have looked.

Consumer spending is fading, as the University of Michigan consumer sentiment is at 53.3.

Real consumer spending growth has decelerated. Higher gas prices act as a regressive tax, hitting the bottom 60% of households hardest.

The Fed

The Fed may be trapped due to its dual mandates: maximum employment and stable prices. Meanwhile, Core PCE (inflation) remains above 3%, and rising oil prices are pushing headline inflation higher.

But the labor market is weakening, and growth is slowing. Cutting risks re-igniting inflation. Raising or keeping rates at current levels risks a deeper downturn. There is no clean option.

The same stagflation trap preceded the worst outcomes in 1973-74.

Tariffs are compounding the oil shock. Section 122 surcharges of 10-15% on imports are adding to cost pressures independent of oil.

Unlike oil prices, tariffs do not reverse with a ceasefire. The combination of supply-side inflation from oil and tariffs narrows the Fed’s room to respond with rate cuts.

The Private Credit Issue

Then there is the problem of escalating private credit stress. Apollo and Ares have gated redemptions on several funds after receiving over 11% in quarterly redemption requests. KKR’s Future Standard fund was downgraded to junk by Moody’s.

JPMorgan estimates that 30% of the $1.8 trillion private credit market is lent to software companies, precisely the sector most vulnerable to an AI-related spending pullback.

Private credit barely existed during the last recession. Nobody knows exactly how the stress will impact the economy or the markets.

The Bond Market

The yield curve un-inversion deserves attention. The 2-year/10-year spread un-inverted in late 2025 after the longest inversion in history.

Historically, un-inversion has preceded every recession since 1989, with a median lead time of about five months. We are roughly four months past un-inversion now. That does not guarantee a recession, but it puts the clock in a historically uncomfortable zone.

Where This Leaves Investors

Watch the charts. Charts, in my opinion, are one of the greatest tools to get an insight into how investors are positioning themselves.

Are they buying at key levels, where they can buy strong names on sale? Or has something changed their outlook and they no longer believe that current prices are “a deal” because a recession is right around the corner?

Currently, the S&P 500 has pulled back to some important levels. Keep an eye on how the market reacts at these levels.

History says this five-week decline is likely a buying opportunity with strong 12-month forward returns, if the economy avoids recession.

The bulls can point to unemployment claims data, ISM readings, and the possibility of an Iran resolution.

However, if the economy tips into recession - and the bear case has its own compelling logic: the oil shock severity, payroll deterioration, and private credit stress - then the current decline could be just the opening act of a larger drawdown.

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

With charts like this, I like to look at not just the level, but the catalysts that may cause the dollar to breakout or fail to breakout again.

Adam over at the Kobeissi Letter posted this chart from Goldman Sachs. The chart shows how systematic funds are starting to aggressively sell their global equity positions.

X: KobeissiLetter

Why does this matter? Well, it is a potential signal that money managers are starting to take the viewpoint that the US dollar is about to get stronger.

Fellow Terp and CMT, Finnian Devine then shared this chart with me:

X: Finnian Devine, CMT

What May Cause the Dollar to Rise?

The big question is, what are these money managers worried about?

It’s inflation. It's still here. It’s still sticky.

As inflation continues to be a problem, the chances of further rate cuts from the Fed are starting to fade.

Below is the FedWatch Tool. It shows how the futures market is pricing the chances of future cuts/hikes by the Fed by the end of 2026:

Notice the shift in consensus from just a month ago. The odds of rates staying where they are have jumped from 4.9% to 40%.

The market is now indicating that we may get one or zero rate cuts for the rest of the year.

This will attract foreign capital.

Foreign Capital

The combination of higher US interest rates, a strengthening currency, and deep liquid capital markets creates a powerful pull for global savings. The higher inflow from overseas causes an increase in demand for the dollar. Thus, the dollar rises.

Foreign holdings of US assets exceed $35 trillion, with European investors alone holding approximately $8 trillion in US bonds and equities (Morgan Stanley data).

This capital attraction is self-reinforcing: foreign demand for dollar-denominated assets pushes the dollar higher, which increases returns for foreign investors, which attracts more capital.

The Consumer Benefits from a Strong Dollar

If the dollar does breakout and begin to strengthen, there will be a major benefit to consumers in the form of deflation.

A strong dollar makes imports cheaper, acting as a disinflationary force.

American consumers benefit from lower prices on imported goods such as electronics, automobiles, clothing, and energy.

In addition, most global commodities are priced in US dollars; when the US dollar is weaker, it increases their price for American buyers while making them cheaper for foreign purchasers (boosting demand). This adds to inflation.

Why Would We Not Want a Strong Dollar?

A strong dollar will have a negative impact on exporters. US goods become more expensive abroad, reducing competitiveness.

During the dollar’s 2010-2024 bull cycle (approximately 40% cumulative appreciation), US manufacturers consistently cited currency headwinds as a drag on international sales. The trade deficit widened substantially during this period, reaching record levels.

For example, when the dollar weakens 10%, a $100 American product effectively drops to $90 for a European buyer (assuming EUR/USD appreciation).

This price advantage accumulates across billions of dollars in annual trade flows. US sectors like manufacturing, agriculture, and technology services — sectors with significant export exposure — stand to benefit most directly when the dollar is weak.

Foreign consumers (they get lower prices) and US companies (they sell more overseas because they can underprice foreign competitors) are the clear winners when the dollar is weaker:

● EUR/USD: US goods became 11.8% cheaper for European buyers in 2025 (dollar fell 11.8% vs. the euro)

● USD/MXN: US goods became 13.5% cheaper for Mexican buyers (dollar fell 13.5% vs. the peso)

● GBP/USD: US goods became 7.5% cheaper for British buyers (dollar fell 7.5% vs. the pound)

Looking Back at 2018’s Winners and Losers

While global political events can have a big impact on the market, I did want to look at the areas that did well during the rising dollar event that occurred in 2018.

Healthcare, Utilities, and Real Estate rose along with the dollar during this time, while the rest of the sectors and the S&P 500 declined:

Note: Past performance is not indicative of future results. Source: Koyfin

Every market cycle is different. Keep a close eye on the charts if/when the dollar starts to strengthen to see if similar patterns emerge, indicating we may see a repeat of 2018.

What I’m Watching

In addition to policy changes from the White House and the Fed, the charts tell the real story.

I want to see how the markets react at current levels. Do investors feel that there is value and an opportunity to invest in dollars at current levels?

Or do they feel that policies will be revised to push the dollar lower when/if the dollar begins to break out to the upside?

For now, I am paying close attention to DXY. A meaningful breakout above 100 is a notable move and may force changes to Wall Street’s outlook and US economic policies.

John Rothe, CMT

ARTAIS Capital Management

john.rothe@artaiscapital.com

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

Sources

Morgan Stanley — US Dollar Devaluation Research (2025)

RSM — Market Minute: Weak Dollar Policy (2025-2026)

FactSet — S&P 500 International Revenue Analysis (2025)

Bureau of Economic Analysis — US International Trade 2025

Tax Foundation — Tariff Tracker: 2026 Trump Tariffs & Trade War

Federal Reserve — FOMC Minutes and Dot Plot (December 2025)

Goldman Sachs — Dollar Diversification Research (2025)

TradingEconomics — DXY, Trade Balance, Interest Rate Data

Apollo Academy — S&P 500 Foreign Revenue Data (2025)

S&P Global Market Intelligence — International Revenue Rebounds for S&P 500 Companies, Q1 2025

Goldman Sachs Global Investment Research — Foreign Sales Exposure Analysis and Sector-Neutral Baskets

Visual Capitalist — Visualizing the S&P 500’s Domestic and Foreign Revenues (2024)

Last fall, there was a shift in the market.

Stocks that had been leading the markets higher came to a screeching halt.

Names like Nvidia, Apple, and Google just stopped going up as fears of overvaluation and the impact that AI may have on other sectors of the market changed the narrative from “we are going to get massive growth from AI” to “AI is going to destroy a lot of companies.”

Areas like the software sector got crushed as investors began to worry that AI would be able to easily replicate and replace legacy software.

Names like Salesforce, Adobe, and ServiceNow became collateral damage in the AI disruption narrative.

Value Takes the Lead: Industrials and Materials Surge

Value companies became the new leaders.

The Industrial and Materials sectors took off and saw an impressive rise during this time.

The rotation was textbook. As the RRG chart below shows, the technology sector was rotating into weakness while value and cyclical plays were accelerating toward strength.

Money was leaving one side of the market and flowing into the other.

Note: RRG Chart as of 11/17/2025

There were real catalysts behind this move. The passage of the “One Big Beautiful Bill Act” in early 2026 injected an estimated $137 billion in corporate tax reductions, with the largest benefits flowing to manufacturing and R&D.1

Companies like Caterpillar got re-rated as an “AI-adjacent” infrastructure play because its power generators became essential for the global buildout of AI data centers.

This was not just sentiment — it was fiscal policy lifting the real economy in a way that growth stocks could not capture.

The Iran Catalyst: Why War Is Accelerating the Rotation Back to Tech

On February 28, 2026, U.S. and Israeli military forces launched strikes against Iran, setting off what has become the most significant geopolitical event since the Russian invasion of Ukraine.

The conflict has since expanded across the Middle East, pulling in Israel and disrupting global oil trade routes through the Strait of Hormuz.

The global markets immediately reacted.

Japan’s Nikkei 225 plunged more than 5%. South Korea’s KOSPI suffered its worst single-day decline on record, dropping over 12%. Oil prices spiked to nearly $120 a barrel. The average price of unleaded gasoline hit $3.54 per gallon — a 21% increase from a month earlier and the highest level since mid-2024.

But here is what matters for portfolio positioning: the damage was not distributed equally across the market.

Tech and growth held up. Value and cyclicals did not.

Sector performance since the Iran conflict began (Feb 28, 2026). Source: Yahoo Finance / ARTAIS Capital Management

Why? Three reasons.

First, tech companies have minimal direct exposure to the conflict.

Unlike industrials and materials companies, which face rising input costs from spiking oil prices and supply chain disruptions through the Middle East, a software company’s cost structure is largely unaffected by crude prices.

Microsoft’s Azure margins do not change because oil hit $120. Google’s ad revenue does not decline because shipping lanes through the Strait of Hormuz are closed.

Second, after months of underperforming, tech valuations had corrected enough to look attractive again.

Morningstar noted that tech valuations were “sufficiently attractive to warrant investment,”2 and fund flow data showed sustained inflows into global tech funds even as the broader market sold off.

Third, flight to quality. When geopolitical uncertainty spikes, institutional capital gravitates toward large-cap, high-quality balance sheets.

Mega-cap tech — Apple, Microsoft, Google, Nvidia — fits that description better than any other corner of the market. These are companies with hundreds of billions in cash, minimal debt, and business models that generate free cash flow regardless of what happens in the Persian Gulf.

What Comes Next?

The key question is not whether tech can sustain a rally — the fundamentals and the flows both support it. The question is whether the conflict broadens in a way that overwhelms the flight-to-quality trade entirely and forces a broad de-risking across all sectors.

That scenario remains possible, but it is not what the data is showing today.

Until it does, the evidence points toward a continuation of this rotation back into growth and technology, with mega-cap quality names leading the way.

Staying tactical, watching the RRG signals, and resisting the urge to chase the value trade that the market may already be unwinding is the discipline this environment demands.

Happy trading,

John Rothe, CMT

ARTAIS Capital Management

john.rothe@artaiscapital.com

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

What’s Actually Happening

Let’s dispense with the euphemisms. Markets aren’t “experiencing volatility” — they’re repricing for a world where 20% of global oil supply is offline, and the US economy is shedding jobs.

Those are two things that aren’t supposed to happen at the same time.

The Iran war, now entering its second week, has effectively closed the Strait of Hormuz — the narrow waterway through which a quarter of the world’s seaborne oil passes.

WTI crude has surged to $107 a barrel. Brent briefly topped $119. Qatar declared force majeure on its liquefied natural gas exports after Iranian strikes on the Ras Laffan complex. Saudi Arabia’s Ras Tanura refinery — the largest in the Middle East — shut down as a precaution after drone interception debris caused a fire. Gas at the pump is heading to $4 a gallon, and diesel has doubled in Europe.

This is not a speculative spike driven by fear — it’s a physical supply crisis with cascading second-order effects.

Then came Friday’s jobs report: the economy lost 92,000 jobs when economists expected it to add 55,000.

The word no one in Washington or on Wall Street wants to say out loud is now unavoidable: stagflation.

Healthcare — a historically resilient sector — shed 28,000 positions, though a Kaiser Permanente strike affecting over 30,000 workers in Hawaii and California accounted for much of that decline.

Strip out the strike, and the underlying picture is still soft — but the headline number overstates the structural weakness. The unemployment rate ticked up to 4.4%. The word no one in Washington or on Wall Street wants to say out loud is now unavoidable: stagflation.

The Pain Investors Are Feeling Right Now

What makes this moment particularly difficult is that there’s no obvious playbook.

In a normal correction, you can point to an overvalued market that needs to reset, or a Fed that’s been too tight, or earnings that missed expectations.

Those are problems with identifiable solutions. This is different.

This is a supply-side shock layered on top of a weakening labor market, and it’s happening while the Federal Reserve is paralyzed.

Cut rates, and you pour fuel on energy-driven inflation.

Hold rates, and you watch the job market deteriorate.

The Fed “put” — that implicit backstop that has bailed out investors in every downturn since 2009 — doesn’t work when the problem is bombs and barrels, not balance sheets.

For the investor who built a “diversified” portfolio of US equities, international stocks, and bonds, the math is unforgiving this month.

Equities are down across the board. International markets are getting hit harder by the energy shock. Bonds are rallying modestly, but not enough to offset equity losses.

The only things working are energy stocks, gold at $5,125 an ounce, and cash.

True diversification, it turns out, requires the ability to own none of the above when they’re all going the wrong direction.

And that’s the quiet pain that no allocation chart or Monte Carlo simulation prepares you for: the realization that “staying the course” is indistinguishable from “doing nothing” when the course itself has changed.

The Bull Case — Why This Could Resolve

Before we write the obituary for this bull market, the evidence for resolution deserves honest consideration.

First, geopolitical oil spikes have historically reversed within three to six months as demand destruction, strategic petroleum reserve releases, and diplomatic efforts combine to cap prices.

Second, the VIX is strikingly low for a crisis of this magnitude, suggesting either complacency or that the market sees a resolution ahead.

Third, the S&P 500 has not broken its 200-day moving average. Every correction in this cycle that held that level produced a meaningful bounce.

Fourth, the weak jobs data actually strengthens the case for Fed rate cuts — the March 17–18 FOMC meeting could deliver a dovish pivot that sparks relief.

And fifth, corporate earnings growth remains positive; this is an exogenous shock, not an earnings recession.

The bull case requires things to go right — de-escalation, Hormuz reopening, a cooperative Fed. That’s a lot of “ifs.”

The Bear Case — Why This Could Get Worse

The bear case requires only that the current trajectory continue.

Twenty percent of the global oil supply offline is unprecedented in modern markets.

Even if a ceasefire materializes tomorrow, the infrastructure damage to Saudi and Qatari facilities will take months to repair.

Meanwhile, the consumer spending cliff is approaching fast — $4 gas plus a deteriorating job market is a double squeeze on household budgets that shows up in earnings within one to two quarters.

The technical damage is real and accelerating.

The S&P 500 has broken below its 50-day moving average. The weekly Price Momentum Oscillator is turning down — historically a signal of sustained downtrends, not buyable dips.

Sector breadth is narrowing to just energy, and narrow leadership in a declining market is one of the most reliable bearish signals in technical analysis.

What To Watch

Despite the recent volatility, tech stocks have been holding up better than the rest of the market.

Since last Fall, tech stocks have been underperforming most value sectors within the market. But the tech sector has been trading in a sideways range. Not getting weaker, not getting stronger.

Instead, the sector has been consolidating/absorbing the gains from 2025:

Last year’s big winner was NVIDIA. Currently, the stock is stuck in the same sideways trading pattern.

The extended sideways trading range can lead to a next leg up for AI stocks. I believe the opportunity is too great to ignore, and we may start seeing the shift back into these sectors as traders take profits from the energy sector.

Due to the large weighting of the technology sector within the S&P 500, this can potentially push the S&P 500 higher and out of its trading range.

I am keeping a close eye on sector rotation. Already, the rotation within the market is starting.

The Relative Rotation Graph(RRG) for the sectors within the S&P 500 is already showing a rotation that is favoring tech and communication sectors, while value sectors like materials and industrial are rotating towards weakness:

Conclusion

It’s going to be up to last year’s winners to give direction to this market. If investors believe the overall bull market theme remains intact, then we should start seeing opportunistic investors looking for bargains.

If they don’t step in this week, then Wall Street will need to revisit and reprice their 5 year outlooks, which will cause major disruption to the US markets.

Happy trading,

John Rothe, CMT

ARTAIS Capital Management

john.rothe@artaiscapital.com

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

“The stock market has predicted nine of the last five recessions.” — Paul Samuelson. But here’s what Samuelson didn’t say: it’s also priced in roughly zero of the last eight U.S. military strikes within six months.

This past weekend, the United States and Israel launched joint military strikes against Iran, killing Supreme Leader Ayatollah Ali Khamenei and multiple senior officials. It was the most significant direct U.S. military action against a sovereign nation since the Iraq War in 2003.

Markets reacted on cue: S&P 500 futures fell more than 1%. Brent crude surged over 9% toward $79 per barrel. Gold jumped nearly 3%. CNBC ran the banner: “MARKETS IN TURMOIL.”

If your instinct is to sell first and ask questions later, I understand it. But before you let headlines dictate your portfolio, let’s look at what actually happens to the stockmarket and specific sectors in the days, weeks, and months after the U.S. goes to war.

The data may surprise you.

What History Actually Shows: The Counterintuitive Evidence

Since World War II, the United States has launched military strikes, interventions, or full-scale operations more than a dozen times. The pattern in markets is remarkably consistent — and remarkably counterintuitive.

The First Week: Knee-Jerk Selling, Fast Recovery

The average first-day S&P 500 decline following a major geopolitical military event is -1.1%. That’s it. One bad day. The average total drawdown from peak to trough is -4.7%, and it takes an average of just 19 trading days to find the bottom.

The average recovery from the bottom back to prior highs? 42 trading days — roughly two months.

Here’s what specific conflicts looked like:

Note: Historical returns are provided for educational context only. Past performance is not indicative of future results. Every conflict is unique, and there is no guarantee that future market reactions will mirror historical patterns. All investments involve risk, including the possible loss of principal.

Notice the pattern: The biggest drawdowns occurred when military events coincided with existing economic weakness (the 1990 Kuwait invasion happened during a recession; 9/11 happened during the dot-com bust). When the economy was healthy, markets shrugged off the missiles within days.

One Month Out: Essentially Flat

At the one-month mark after military events, the S&P 500 has averaged a return of approximately -0.1% when no recession is present. During the 2003 Iraq War, the DJIA rose 8.4% in the month following the invasion. After the 2020 Soleimani strike, markets recovered their losses within approximately 72 hours.

The critical variable is not the conflict itself — it’s whether the conflict triggers or coincides with an economic recession. When it doesn’t, markets barely notice.

Six Months Out: The Real Story Emerges

At six months, the picture has historically turned decisively positive. The S&P 500 has averaged approximately +6.3% in the six months following military conflicts when the economy avoids recession. During recessionary periods, the six-month return averaged -6.1%.

After the 1991 Gulf War air campaign, the S&P 500 was up roughly 15% six months later. After the 2003 Iraq invasion, stocks were well on their way to a 26.7% annual gain. After the 2017 Syria strikes, the S&P 500 barely paused before continuing its bull market run.

Note: Historical returns are provided for educational context only. Past performance is not indicative of future results. Every conflict is unique, and there is no guarantee that future market reactions will mirror historical patterns. All investments involve risk, including the possible loss of principal.

The historical takeaway: when the underlying economy has been sound, military conflicts have created buying opportunities, not lasting damage. That said, every conflict is unique, and past patterns provide context — not guarantees.

The Drawdown Playbook: How Deep Have Markets Fallen?

The depth of the initial selloff depends heavily on the scale and perceived risk of the conflict. Limited strikes have produced minimal drawdowns. Major invasions or conflicts that threaten global economic infrastructure have caused deeper pullbacks.

The average drawdown across major geopolitical events since World War II is approximately -4.7%. Pearl Harbor and the Iraqi invasion of Kuwait stand out as outliers because they represented existential threats to U.S. security or global oil supply. Limited strikes like Syria in 2017 or the Soleimani operation barely registered.

The current Iran situation falls somewhere in between: it’s more significant than a limited strike (the killing of a head of state is unprecedented in modern U.S. military action), but the economic risk depends entirely on what happens to the Strait of Hormuz.

Winners and Losers: The Sector Rotation Playbook

Military conflicts have historically triggered predictable rotations across sectors. Some tend to win immediately.

Others tend to suffer.

The magnitude depends on the conflict’s impact on energy markets and economic growth expectations.

Historical Winners

Energy (+8-10% in the first 48 hours)

Energy is the most direct beneficiary of Middle East conflicts. Brent crude surged over 9% toward $79; WTI climbed over 9% to roughly $73. If the Strait of Hormuz sees sustained disruption, J.P. Morgan estimates oil could test $100 or higher. Energy equities (XLE) have historically outperformed during Middle East conflicts because the same supply fears that pressure the broader economy tend to directly boost energy sector revenues.

Defense & Aerospace (+2-3% initial, with potential longer tailwind)

Lockheed Martin, Northrop Grumman, and RTX have been standout performers in 2025-2026. The iShares U.S. Aerospace & Defense ETF (ITA) is up approximately 14% year-to-date, with a roughly 35% surge since the first strikes on Iranian nuclear facilities last June. Defense stocks often spike at the onset of a conflict — and unlike some geopolitical trades, this sector can benefit from a longer-term tailwind because military spending commitments tend to extend for years.

Gold & Precious Metals (+2-3%)

Gold jumped approximately 2.9% to roughly $5,391 per ounce. When bonds can’t serve as the safe haven (as in this current inflationary scenario), gold has historically filled the void. Gold miners (GDX) tend to amplify gold’s moves with additional leverage.

Utilities & Consumer Staples (Relative Defensive Stability)

Traditional defensive sectors don’t typically surge, but they have historically provided relative stability. Utilities and consumer staples tend to outperform on a relative basis during periods of elevated geopolitical uncertainty because their earnings are generally less sensitive to economic cycles and energy costs.

Historical Losers

Airlines & Travel (-5-7% or more)

Airlines have historically been the most immediate casualty of military conflicts. In the current situation, over 50% of global flights to the Middle East were cancelled within hours of the strikes. Qantas plunged as much as 10% before recovering to close down approximately 6%. ANA and Japan Airlines dropped more than 5%. IAG (British Airways parent) fell nearly 7%. Airlines face a triple threat: surging jet fuel costs, route disruptions, and reduced consumer travel demand.

Technology (-2% or more)

Tech stocks led the futures selloff with Nasdaq futures down approximately 2%. High-growth technology companies tend to be rate-sensitive, and if oil-driven inflation pushes yields higher (which is already happening), their valuations may compress. Additionally, any conflict that threatens global supply chains raises concerns for semiconductor and hardware companies with Asian manufacturing exposure.

Consumer Discretionary

Higher energy prices function as a tax on consumers. When gasoline prices rise, spending on discretionary items tends to fall. Restaurants, retailers, and auto manufacturers have historically underperformed when oil spikes.

Financials (Mixed, Trending Negative Short-Term)

Banks face a complicated picture. Higher interest rates could boost net interest margins, but increased credit risk, potential loan defaults in energy-sensitive regions, and general risk-off sentiment have historically pushed financials lower in the first weeks of a conflict.

The Critical Variable: Does This Cause a Recession?

Here’s the single most important question for your portfolio right now — and it’s not “will we go to war?” We’re already there.

The question is: Does this conflict tip the U.S. economy into recession?

The historical data has been unambiguous on this point:

Note: Historical returns are provided for educational context only. Past performance is not indicative of future results. Every conflict is unique, and there is no guarantee that future market reactions will mirror historical patterns. All investments involve risk, including the possible loss of principal.

The spread between these two historical outcomes is enormous: +9.2% versus -11.5% at the 12-month mark. That’s a 20-percentage-point gap driven entirely by whether the economy held up.

The Recession Risk Factors to Watch

• Oil above $100/barrel: Historically, this represents a potential stagflation threshold. Every $10 increase in oil has tended to shave roughly 0.1-0.2% off GDP growth and add 0.2-0.3% to inflation.

• Strait of Hormuz closure: Would represent a genuine economic shock. 20% of the global oil supply transits this chokepoint daily. A sustained closure could push oil to $120-130, according to J.P. Morgan estimates.

• Conflict duration: Limited strikes (days to weeks) have historically had minimal economic impact. Prolonged military campaigns (months) have tended to affect consumer confidence and business investment.

• Federal Reserve response: If oil-driven inflation forces the Fed to maintain or raise rates during a growth slowdown, the recession probability could increase significantly.

The Skeptic’s Corner: Why This Time Could Be Different

Before concluding that history guarantees a market recovery, consider the counterarguments:

1. Iran is not Iraq, Syria, or Libya.

Iran is the world’s sixth-largest oil producer and controls access to the Strait of Hormuz. Previous U.S. military actions targeted countries with limited ability to disrupt global energy markets. Iran has that ability.

2. The killing of a head of state is unprecedented.

The Soleimani strike killed a military commander. These strikes killed the Supreme Leader. The geopolitical escalation risk is categorically different, and the path to de-escalation is far less clear.

3. Markets were already fragile.

The S&P 500 closed at approximately 5,955 on February 27, already dealing with hot inflation data and fading AI optimism. This is not a market striking from all-time highs with maximum confidence.

The ARTAIS Perspective: What We’re Watching

At ARTAIS Capital, we don’t predict whether conflicts will escalate or resolve. We aim to respond to what the data and our indicators tell us in real time.

Here’s my framework for navigating this environment:

1. Monitor the Technical Signals

Our rules-based approach using the Ichimoku Cloud, PMO, and momentum indicators is designed to tell us whether the broader trend remains intact or is breaking down. If the S&P 500 breaks below key cloud support levels, our process may reduce equity exposure — not because of headlines, but because the price action warrants it.

2. Watch Oil, Not Just Stocks

The Strait of Hormuz is the real risk variable. If tanker traffic resumes and oil pulls back below $75, the conflict’s economic impact may be contained. If oil sustains above $85-90, the recession probability rises materially.

3. Sector Positioning Matters

The divergence between winning and losing sectors is unusually wide. Energy, defense, and gold may offer tactical opportunities. Airlines, tech, and consumer discretionary face headwinds. A tactical approach that can shift sector exposure may have a meaningful advantage over a static allocation in this environment.

4. Don’t Sell Into Panic

The historical evidence has been overwhelming: selling on the first day of a military conflict has been the wrong trade in nearly every instance over the past 80 years. The average historical recovery time is 42 trading days. Panic selling has historically locked in losses at exactly the wrong moment.

What Comes Next

This week, markets will attempt to price in the duration and scope of U.S. military operations in Iran. The Monday open will set the initial tone, but the real story will unfold over weeks and months.

I’ll be watching the technical levels, the oil markets, and the bond market’s unusual behavior for signals about what comes next. If history is any guide, the buying opportunity may be right in front of us — but only if the economy holds.

John Rothe, CMT

Founder, Portfolio Manager

ARTAIS Capital Management

3/2/26

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

Three years ago, Nvidia posted $4.4 billion in annual profit. Last week, the company reported $120 billion. The stock dropped. When perfection can’t move the needle, it’s time to pay attention.

Let that number breathe for a moment.

Nvidia delivered fourth-quarter revenue of $68.1 billion, crushing Wall Street’s $66.2 billion estimate. Net income hit $43 billion in a single quarter — more than Cisco Systems generated in annual revenue at the height of the dot-com bubble.

The company guided for $78 billion next quarter, blowing past the $72.8 billion consensus by a margin that would qualify as a rounding error at most companies.

Jensen Huang told analysts that “the agentic AI inflection point has arrived” and that customers are “racing to invest in AI compute.”

Every metric in the report screamed dominance: data center revenue surged 75% year-over-year to $62.3 billion — now a staggering 91.5% of total sales. Free cash flow hit $34.9 billion, up 125%.

The market’s response? A yawn, a shrug, and a 4-5% decline the following day.

This is the single most important signal for investors to understand right now. Not because Nvidia’s business is failing — it clearly isn’t. But because the market’s inability to reward perfection tells you something critical about where we are in the cycle.

The $650 Billion Question

Nvidia’s fortune is directly tied to the biggest capital expenditure wave in corporate history. The four major hyperscalers — Google, Amazon, Microsoft, and Meta — have committed to spending approximately $650 billion on AI infrastructure in 2026, according to Bridgewater Associates.

Here’s what that looks like:

● Amazon: ~$200 billion (up ~55% from $130 billion in 2025)

● Alphabet: $175-185 billion (nearly double the $91 billion spent in 2025)

● Meta: $115-135 billion (up ~80% from $72 billion)

● Microsoft: An estimated $110-150 billion based on analyst extrapolations of quarterly run rates (up from ~$80-90 billion; Microsoft has not provided explicit full-year guidance)

That is real money from the most profitable companies on Earth. Jensen Huang’s mantra — “compute equals revenue” — is being tested at unprecedented scale.

But here’s the math that keeps skeptics awake at night:

Morgan Stanley estimates these hyperscalers will need to borrow approximately $400 billion in 2026, more than double the $165 billion they borrowed in 2025.

When the most profitable companies on Earth start borrowing at this pace to fund a single technology bet, the question stops being “is AI real?” and becomes “does the math work at this scale?”

Cisco’s Ghost

Every tech boom gets its historical parallel, and the most honest comparison isn’t comforting for Nvidia bulls — even though it should be reassuring on the surface.

At Cisco’s peak in March 2000, the company traded at extreme multiples — roughly 200 times trailing earnings according to the Financial Times — on approximately $18.9 billion in annual revenue.

Its customers were dot-com startups burning venture capital. The stock fell 88% over the next two years and took 25 years to recover its all-time high — finally surpassing its March 2000 close in December 2025.

Nvidia’s situation is fundamentally different in several important ways:

● Valuation: Nvidia trades at approximately 47 times trailing earnings, versus Cisco’s roughly 200x. The forward P/E — based on FY2027 analyst consensus estimates of approximately $7.46-$7.74 per share — sits around 25-26x, meaningfully below Nvidia’s own 5-year average P/E of 65x.

● Earnings quality: Nvidia generated $120 billion in real net income. Cisco’s annual profit never exceeded $2.1 billion. Nvidia’s single-quarter profit exceeds Cisco’s peak annual revenue.

● Customer quality: Cisco sold to dot-com startups that evaporated. Nvidia sells to Apple, Microsoft, Google, Amazon, and Meta — companies with over $200 billion in combined free cash flow.

So no, this is not a valuation bubble in the traditional sense. The P/E multiples are elevated but not absurd. The earnings are real. The customers are solvent.

But dismissing the comparison entirely misses the more subtle danger.

The Capacity Bubble

The risk with Nvidia isn’t that the stock price is “fake” the way Cisco’s was. The risk is that demand may be temporary.

Sequoia Capital’s David Cahn framed it as “AI’s $600 Billion Question” — the gap between what’s being spent on AI infrastructure and the actual revenue being generated by AI applications.

Research from MIT found that approximately 95% of companies see no measurable financial return from current generative AI deployments.

The hyperscalers insist capacity is being absorbed as fast as they can deploy it. And that may be true — today. But enterprise CIO surveys from Morgan Stanley indicate only 3.8% growth in software budgets for 2026, suggesting the companies buying AI capacity might not be scaling spending as fast as the companies building it.

Source: Koyfin

This is what I’d call a “capacity bubble” — not a valuation bubble. Nvidia’s earnings are real, but they’re dependent on customers continuing to pour capital into infrastructure at a rate that may or may not be sustainable.

Goldman Sachs argues AI capex at 0.8% of GDP remains well below the 1.5%+ peaks seen during prior technology investment cycles — like the late-1990s telecom buildout — suggesting room to run. But Goldman also noted that capital spending of this magnitude has never been concentrated in so few companies.

The Concentration Problem

This brings us to the elephant in the room for index investors.

The Magnificent Seven now represent approximately 34% of the S&P 500’s market capitalization, according to Motley Fool research as of early February 2026.

That’s above the 27% concentration peak during the dot-com bubble, per RBC Wealth Management data. The top 10 stocks account for roughly 39% of the index.

Nvidia contines to struggle in 2026 and is still approx 13% below its 2025 high.

Nvidia alone is approximately 7.3% of the S&P 500 — one company’s quarterly earnings report effectively moving the direction of the entire market. When Nvidia dropped 4-5% the day after earnings, it dragged the Nasdaq lower with it.

For investors in passive index funds — which now represent the majority of equity market flows — you are making a concentrated bet on AI infrastructure spending whether you realize it or not.

Buying the S&P 500 means roughly a third of your money goes to seven companies, most of which are either building AI infrastructure or selling it.

What a Rules-Based Investor Should Watch

The market’s reaction to Nvidia’s earnings tells a familiar story to students of market cycles: when expectations get so high that perfection isn’t enough, you’re in the late innings.

That doesn’t mean the top is in. Bull markets routinely climb walls of worry, and Nvidia’s actual business metrics remain extraordinary. A forward P/E of roughly 25x for a company growing earnings around 58% annually is not expensive by traditional growth metrics.

But momentum-based investors should be watching three signals:

1. Earnings revision trajectory. When analyst estimates stop rising — even if earnings keep beating — the momentum trade weakens. Nvidia’s guidance beat was massive ($78 billion versus $72.8 billion consensus), which buys time. But the bar keeps rising.

2. Hyperscaler free cash flow deterioration. If Amazon’s free cash flow turns materially negative and Alphabet’s drops as Pivotal Research projects, watch for any language shift on earnings calls about “optimizing” or “rationalizing” AI spend. That’s the euphemism for cutting budgets.

3. Breadth vs. concentration. The healthiest markets are broad markets. When the S&P 500’s direction is determined by a handful of stocks, the index becomes fragile. Watch the equal-weight S&P 500 versus the cap-weighted version — divergence between the two is a warning sign.

The Skeptic’s Corner

To be fair to the bull case: every mega-trend in technology history faced the same “spending too much, returns unclear” skepticism at scale.

Amazon’s AWS was called a money pit before it became the most profitable business in tech.

Source: Amazon, GeekWire

The internet was “over-hyped” in 1998 — and it was, in the short term — but the long-term skeptics missed a generational shift.

The difference this time is the scale and speed of commitment. $650 billion in a single year from four companies is not a measured bet. It’s an arms race.

Arms races tend to produce winners, but they also produce spectacular waste — and the companies funding this race are doing so with borrowed money.

What This Means for Your Portfolio

Nvidia’s earnings report was perfect. The stock went down. That’s not a market failure — it’s a market telling you that perfection is already priced in.

For tactical investors, this isn’t a sell signal — it’s a caution signal. The momentum remains strong. The earnings are real. But the margin of safety has evaporated.

When $120 billion in profit isn’t enough to excite the market, the risk-reward has shifted.

The right question isn’t whether AI is real. It is.

The right question is whether $650 billion in annual infrastructure spending is sustainable, and what happens to the most concentrated stock market in history if it isn’t.

John Rothe, CMT

Founder, Portfolio Manager

ARTAIS Capital Management

Disclaimer

ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The author and/or ARTAIS Capital clients may be long NVDA stock.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site.

The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, ARTAIS Capital Management, LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

For more information about ARTAIS Capital Management, LLC, including our Form ADV, please visit the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov or contact us directly.

The catalyst for this $800 billion rout was the release of Anthropic’s Claude Cowork, an agentic AI tool capable of navigating complex enterprise software, executing legal reviews, and managing financial triage without human oversight.

This introduction represents an inflection point where AI transitioned from a mere productivity booster to an autonomous agent capable of replacing human workflows entirely.

The so-called “Software-mageddon” saw nearly $300 billion in market value evaporated from the application software layer.

The core fear among investors is the “seat-sensitive” nature of software revenue. For over a decade, the “per-seat” subscription model provided predictable, recurring revenue.

However, if an AI “agent” can perform the work of dozens of junior associates, the need for seat licenses diminishes exponentially.

Not Just Tech

The selloff has not been confined to pure-play software firms. Wealth management, private credit, insurance, and real estate services were also hit.

Firms like Raymond James and Charles Schwab saw declines of 8.9% and 11.9%, respectively, as the market began asking “who is next” in the path of AI-driven displacement. (as of 2/19/26)

An Opportunity?

Previously, I wrote how value stocks were leading the market since last Fall: The NVIDIA Trap: Why the S&P 500 is Flat While New Winners are Soaring, where I discussed how the market dynamics of were being defined by a large rotation in value. (If you are not familiar with RRGs, reference the above article for a brief primer.)

During this period, Energy and Industrial sectors were leading the market with strong momentum, while previous leadership sectors, like Tech, were getting weaker.

As of 2/11/26

However, I am now seeing an opportunity in Technology, as the rotation is signaling an end to this trend. (Whether this is a short or long-term trend/trade has yet to be seen).

Currently, Relative Rotation Graphs are showing strength coming back to Tech, at the expense of value sectors, like Materials, Industrials, and Consumer Staples.

The weakness in value sectors is occurring at levels, that in my work, are price targets - reaching the upper band of their long term trend:

To me, this further confirms the rotation that is beginning to occur.

The “Value” in RRG Charts

You may be asking “John, why is a sector in the lagging quadrant an opportunity?

Mathew Verdouw, CMT, CFTe, who is the founder of OPTUMA software (and just an overall smart guy) wrote a white paper titled: Buying Outperformers is Too Late.

In his white paper, he tested various market rotation scenarios, including what happens after a sector that is in the lagging quadrant begins to “curve” towards strength — which he refers to as heading Northeast.

Source: Buying Outperformers is Too Late

As you can see, the testing Mr Verdouw did shows some pretty impressive results.

Microsoft

Remember, the above chart showing the Industrial sector reaching its upper trend line?

Now, let’s look at Microsoft:

The Microsoft chart is showing us the opposite of the Industries sector. The price has reached the bottom of its long term trend.

Wall Street is taking notice too, which can further help support continued rotation back into Tech stocks.

J.P. Morgan strategists are now calling out what they term as “Broken Logic” in the current market selloff.

The core of their argument is simple: if agentic AI is truly set to disrupt the entire software industry, then the “hyperscalers” building the infrastructure for that disruption—Microsoft, specifically—should be seeing a massive valuation premium, not a 13–18% haircut.

They note that the market is selling indiscriminately, punishing the very companies that own the “AI supply chain” alongside the legacy software firms they are supposedly replacing.

While the “seat-sensitive” model is under fire, the fundamental Moat for Microsoft remains its massive $281 billion backlog in AI service contracts.

Morgan Stanley recently issued a note highlighting that Microsoft is currently “under-owned” by institutional standards, suggesting that the capex fatigue currently spooking investors is masking a coming-of-age for the AI era.

Conclusion

From a technical perspective, the signals are reaching a point of historical exhaustion.

According to JP Morgan, the iShares Expanded Tech-Software Sector ETF (IGV) is trading over 20% below its 200-day moving average, the widest spread since the tail end of the dotcom crash.

Source: Bloomberg Finance L.P., JP Morgan

We are seeing this reflected on our Relative Rotation Graphs, where the tech sector’s tail is starting to "hook" toward the Northeast, signaling that the relative downtrend is decelerating and a rotation back into strength is beginning.

The current data suggests that there may be an opportunity for high-conviction names like Microsoft, as the gap between market perception and operational reality has finally created a tactical opportunity for the next leg of this cycle.

John Rothe, CMT

Founder, Portfolio Manager

ARTAIS Capital Management

Important Disclosures

Investment Advisory Notice: This content is authored by an investment advisor and the owner of ARTAIS Capital Management, LLC (“ARTAIS Capital”). The views expressed are for educational and informational purposes only and do not constitute a recommendation to buy or sell any security or to adopt any investment strategy.

Conflict of Interest Disclosure: The author and/or clients of ARTAIS Capital currently hold a long position in Microsft (MSFT) stock. This creates a potential conflict of interest as the author may benefit from an increase in the stock price. This analysis is intended to be fair and balanced; however, readers should be aware of this position when evaluating the content.

Risk Warning: All investing involves risk, including the loss of principal. Past performance of any sector, index (such as the S&P 500), or individual security (such as MSFT) is not indicative of future results. No guarantee is made that any market forecast or technical indicator (like RRG) will be successful. Always consult with a qualified financial professional regarding your specific situation.

Current data suggests a notable shift in the precious metals space.

Specifically, SPDR Gold Shares (GLD) and miners like GDX and XME are exhibiting a technical pattern known as a “higher low” on the RRG.

While this is often viewed as a bullish signal by technical analysts, it is important to evaluate this rotation within the context of overall market risk and the limitations of momentum-based indicators.

What the RRG Tells Us (And What It Doesn’t)

An RRG plots assets across four quadrants based on Relative Strength (RS-Ratio) and Momentum (RS-Momentum). Assets typically rotate clockwise:

• Leading: Strong relative trend and accelerating momentum.

• Weakening: Strong relative trend, but decelerating momentum.

• Lagging: Weak relative trend and decelerating momentum.

• Improving: Weak relative trend, but accelerating momentum.

Risk Note: It is important to remember that RRG is a lagging indicator based on historical price data. Past performance, and past rotations, do not guarantee future results. An asset can “stall” in any quadrant or reverse its course unexpectedly due to macro shifts.

The Current Observation: A “Hook” in Weakening

As of mid-February 2026, GLD has been moving through the Weakening quadrant. In a standard cycle, we might expect it to continue into the Lagging zone.

However, the current “tail” (the path of the asset’s movement) has begun to curl back toward the Leading quadrant:

In technical analysis, this “hook” is interpreted as a higher low in relative momentum.

This suggests that while Gold’s outperformance slowed down, it did not drop below the benchmark’s performance before momentum began to pick up again.

Why this is monitored:

1. Trend Persistence: It indicates the primary uptrend in relative strength may be resuming.

2. Momentum Shift: It suggests buyers are stepping in earlier than they did in previous cycles.

Balancing the Bullish View with Market Reality

While the “hook” toward the Leading quadrant is a constructive technical sign, investors must consider the risks:

• Whipsaw Risk: Momentum indicators can produce “false starts” where a tail hooks upward only to reverse sharply if market conditions change (e.g., an unexpected shift in interest rate policy).

• Benchmark Dependency: Because RRG is relative, Gold can look “strong” simply because the S&P 500 is exceptionally weak, even if Gold’s absolute price is flat or declining.

• Volatility in Miners: While GDX and XME are showing similar momentum hooks, mining stocks carry significantly higher idiosyncratic risk and volatility than physical gold or GLD.

Historical Correlation and the S&P 500

The current RRG setup for Gold represents a high-interest inflection point for technical traders. The refusal to enter the Lagging quadrant demonstrates significant resilience in the current environment.

While we do not hold precious metals in our equity strategy at ARTAIS Capital, the strength in this category cannot be ignored, as it can have an impact on other sectors within the S&P 500:

Source: Bloomberg, S&P Dow Jones Indices, and State Street Global Advisors, ARTAIS Capital

Conclusion: The Strategic Signal in the Golden Hook

At ARTAIS Capital, our rules-based approach isn’t just about what we own, but what the broader market is signaling.

The “hook” we are currently observing in GLD is more than just a technical curiosity; it’s a reflection of shifting capital flows.

Historically, when gold exhibits this level of relative resilience, it often acts as a precursor to broader sector rotations, specifically benefiting the Materials and Energy sectors while acting as a potential headwind for more rate-sensitive areas like Technology.

John Rothe, CMT

Founder, Portfolio Manager

ARTAIS Capital

2/17/26

Important Disclosures

Investment Advisory Services: ARTAIS Capital Management, LLC (“ARTAIS Capital”) is a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

Educational Purposes Only: This article is for informational and educational purposes only and should not be considered investment advice or a recommendation to buy or sell any particular security, strategy, or investment product. The views expressed are those of John Rothe, CMT and ARTAIS Capital Management as of the date of publication and are subject to change without notice.

Risk of Loss: All investing involves risk, including the potential loss of principal. Past performance is no guarantee of future results. Technical analysis and indicators like the Relative Rotation Graph (RRG) are based on historical price data and may fail to predict future market movements.

Conflicts of Interest: ARTAIS Capital Management and its affiliates may hold positions in the securities mentioned (including GLD, GDX, or XME) or may trade them for client accounts. Such positions may change at any time without notice. We do not receive compensation from the issuers of the ETFs mentioned.

Third-Party Data: Information obtained from third-party sources (Bloomberg, S&P Dow Jones Indices, SSGA) is believed to be reliable but is not guaranteed as to its accuracy or completeness.

Not a Solicitation: This communication is not an offer to sell or a solicitation of an offer to purchase any investment product or advisory service. Such offers can only be made through the firm’s ADV Part 2A brochure.

Between headlines about a new Fed Chief, sticky 3% inflation, and the ongoing debate over the impact of new trade tariffs, (and everything else filling the news cycle), there is no shortage of things to worry about.

Yet, if you look at the credit markets, you’ll see a very different story.

The BofA Merrill Lynch High-Yield Spread—the extra yield investors demand to hold “junk” bonds over safe government debt— remains within historical norms.

What is a High-Yield Spread?

To put it into perspective, the spread represents the “risk premium” investors want over safe-haven asset classes, like U.S. Treasury bonds.

For example:

• If a 10-year U.S. Treasury bond yields 4%...

• And a high-yield bond yields 8%...

• The spread is 400 basis points (or 4 percentage points).

This gap compensates investors for taking on credit risk—the chance that a company might default.

When spreads are tightening (falling), it means investors are hungry for risk and confident in the economy.

When spreads are rising, investors are nervous about the economy and the ability of these high-yield bonds to avoid default.

Finding Clarity in the Ichimoku Cloud

To filter out the daily noise of the 24-hour news cycle, we use the Ichimoku Cloud. It’s a technical model that helps us visualize the trend:

• Above the Cloud: A rising trend. In this context, that would mean investors are starting to panic about the economy.

• Below the Cloud: A declining or stable trend. This indicates a healthy, “risk-on” environment.

Currently, the high-yield spread is trading comfortably below the cloud:

What Does This Mean for Equity Investors?

Credit markets often act as a "leading indicator" for stocks. Below is an overlay of the S&P 500 index (shaded in red during periods when the spread traded above the cloud):

As the chart illustrates, periods where spreads rise above the cloud have often coincided with equity market downturns. While no single technical indicator is perfectly accurate or should be used in isolation, the current trend suggests that the underlying credit market foundation remains firmer than the headlines might imply.

Note: Investors should remain aware that exceptionally low spreads can also signal market complacency, leaving little room for error if economic conditions shift.

John Rothe

Founder, Portfolio Manager

ARTAIS Capital

2/12/26

—————-

Disclosure: This post is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Technical analysis is one of many tools used in market evaluation and should not be the sole basis for investment decisions.

But as we move through February 2026, the “Magnificent” era is facing a new challenger: the math of exhaustion.

While the headlines still obsess over every NVIDIA earnings beat, a quiet shift is happening under the hood. To see it, you have to stop looking at price charts and start looking at “Relative Rotation.”

The Market as a Race Track

Most investors look at a stock chart and ask, “Is it going up?” But institutional pros ask, “Is it going up faster than the market?”

Source: RRG Research, StockCharts.com

Think of a Relative Rotation Graph (RRG) as a circular race track with four zones.

• The Leading zone is where the winners live.

• The Weakening zone is where the winners go to catch their breath.

• The Lagging zone is for the underperformers.

• The Improving zone is the “on-ramp” where discarded stocks start to find their legs again.

When you plot the market this way, you see a story that a regular price chart misses.

For most of 2025, Tech (XLK) lived firmly in the Leading quadrant. But recently, we’ve seen those “tails” on the graph start to curl downward toward the Weakening zone.

Meanwhile, the “boring” sectors—Financials, Energy, and Value-heavy industrials—are making a beeline for the Leading quadrant.

Source: Optuma, ARTAIS Capital Management

The 7% Problem: The NVIDIA Effect

To understand why the S&P 500 feels so disjointed lately, look no further than NVIDIA’s weighting. At roughly 7.31% of the entire index, NVIDIA is a gravitational force.

When NVIDIA has a bad day, it doesn’t just pull down the tech sector; it drags the entire S&P 500 into the red, even if 400 other stocks in the index are actually rising.

This concentration creates a “hall of mirrors” effect.

Investors see the S&P 500 flat or down and assume the economy is struggling, when in reality, value stocks and small-caps are having their best month in years.

A closer look at NVIDIA’s chart shows us that the stock is still down 11% from its October 2025 high. Since then, it has been stuck in a sideways trading pattern - unable to break out and reach its former glory.

Tech stocks in general look weak and are stuck in a similar sideways trading range, as market watchers are possibly hesitant to allocate too heavily to the sector until NVIDIA begins to break out towards new highs.

Why “Value” is Gaining Momentum

Why now? It’s a combination of “AI fatigue” and a reality check on valuations.

While NVIDIA’s earnings have been stellar, the market is no longer rewarding “good” news; it is only rewarding “perfect” news.

Meanwhile, sectors like Energy and Materials are benefiting from a weaker dollar and a steadying global economy.

On the RRG, these sectors are currently in the Improving quadrant, showing the strongest “momentum” (the vertical axis) we’ve seen in years. This suggests that the current move into Value isn’t just a one-week fluke—it’s a structural shift in leadership.

The Bottom Line

The “NVIDIA Index” isn’t dead, but it is no longer the only game in town.

By using RRGs to visualize where the money is moving, it becomes clear that the next phase of this bull market likely belongs to the sectors that were left for dead in 2024 - or at least until NVIDIA can reclaim its leadership role again.

If you are still only watching the S&P 500 price, you are only seeing half the movie. It’s time to start watching the rotation.

-John Rothe, CMT

Founder, Portfolio Manager

ARTAIS Capital

2/11/26

Important Disclosures

Investment Advisory Notice: This content is authored by an investment advisor and the owner of ARTAIS Capital Management, LLC (“ARTAIS Capital”). The views expressed are for educational and informational purposes only and do not constitute a recommendation to buy or sell any security or to adopt any investment strategy.

Conflict of Interest Disclosure: The author and/or clients of ARTAIS Capital currently hold a long position in NVIDIA (NVDA) stock. This creates a potential conflict of interest as the author may benefit from an increase in the stock price. This analysis is intended to be fair and balanced; however, readers should be aware of this position when evaluating the content.

Risk Warning: All investing involves risk, including the loss of principal. Past performance of any sector, index (such as the S&P 500), or individual security (such as NVDA) is not indicative of future results. No guarantee is made that any market forecast or technical indicator (like RRG) will be successful. Always consult with a qualified financial professional regarding your specific situation.

• Big News At Disney

• Sector Outlook

• What Do the Charts Say?

• Potential Catalysts

• Conclusion

Big News at Disney

Disney had a big leadership update on Feb. 3 as the board picked Josh D’Amaro as the next CEO, replacing Robert Iger.

The takeaway for investors is simple: the company now has a clearer succession plan, but the spotlight shifts to execution—especially whether an executive best known for parks and “Experiences” can keep momentum in streaming, manage the studio slate, and navigate a changing sports media landscape.

Looking at Disney’s most recent quarter (fiscal 1Q26, ended Dec. 27, 2025), the company showed progress in streaming, but a mixed picture elsewhere.

Revenue rose to $26.0B (+5% year over year) — sales were up in all three major segments:

• Entertainment (+7%)

• Sports (+1%)

• Experiences (+6%)

However, operating profit fell in Entertainment and Sports.

Meaning, growth is there, but profitability isn’t rising evenly across Disney’s portfolio.

Streaming was the bright spot (thanks, Bluey). Management said the subscription streaming business generated $450M in operating profit (up 72% year over year) and guided to about $500M next quarter, while reiterating a longer-term aim of a 10% streaming operating margin for FY26.

Source: Wikipedia

That’s why the market continues to focus on whether Disney can keep improving streaming economics without sacrificing subscriber stability or content quality.

Strategically, Disney is leaning into two areas.

First, it’s upgrading its product and advertising capabilities—including AI-enabled ad tools—and it disclosed a licensing agreement with OpenAI tied to Sora content for Disney+.

Second, the company is pushing harder on sports sold directly to consumers through ESPN, including a path toward a broader DTC product (often referenced as “ESPN Unlimited”) and ongoing rights/portfolio moves (including a Major League Baseball agreement and a transaction involving NFL Network / NFL RedZone).

Sector Outlook

The media landscape is still shifting quickly as streaming continues to take share from traditional TV (that thing your parents still watch).

Nielsen reported that streaming reached a record 47.5% of total TV viewing in December 2025.

Source: Nielsen

That trend keeps long-term pressure on the old pay-TV bundle, which matters for Disney because it weighs on the economics of linear networks (fewer subscribers, harder ad comparisons, and less stable affiliate fees).

At the same time, streaming is no longer a “growth at any cost” story.

Industry forecasts (including work often cited from AlixPartners and Ampere Analysis) still expect continued growth in online video, but competition for both viewing time and ad budgets remains intense—especially with more services offering lower-priced ad-supported options.

For scaled players like Disney, the opportunity is to win on brands, franchises, and sports while improving ad monetization and reducing churn through smarter bundling.

Experiences (theme parks, cruises, consumer products) are still a strong pillar, but it’s not immune to the current economic cycle.

Demand tends to hold up better for higher-income consumers, but international travel trends can swing results—especially the mix of domestic vs. international visitors and what that means for pricing and per-guest spend.

In this backdrop, the main debate is less about pure attendance and more about whether Disney can protect pricing power and deliver a great on-property experience while managing costs.

What Do the Charts Say

Disney stock (DIS) is down nearly 50% since its March 2021 peak. So, is it time to buy? Let’s see what the charts show.

Zooming in, Disney has been stuck in a longer-term sideways trend since 2022:

If the sideways trend continues, there is a risk of a further 20%+ decline in Disney’s stock price.

What is the likelihood of this happening? Let’s examine two concepts:

1. The “Cloud” Model

One of the tools I use to help identify market trends is the Cloud model. The “Cloud”, which is represented by the green and red shaded areas, can help us visualize the current trend of the stock and is based on the Ichimoku Cloud.

It allows us to see if the trend is rising, falling, or moving sideways. The Cloud model also provides us with levels of support and resistance.

The proprietary model at ARTAIS Capital uses the cloud as a way of filtering stock selection. Typically, we only focus on stocks that are trading above the cloud. (Those stocks are then narrowed down with additional tools, analysis, and risk management.)

Going back to 2000, every time Disney’s stock has broken below the cloud, the probability of gain over the next 90 days falls below 50%.

For my fellow finance nerds who are familiar with Optimal f and Risk of Ruin, those results are pretty bad.

Source: OPTUMA

What is interesting in studying the data is that during the 140 times Disney has crossed below the cloud since 2000, the stock reverses and begins to show a positive gain around day 67.

Of note, the above image is the average. The range of this data can vary tremendously, potentially placing the switch in trend to 90+ days:

2) Finding Price Support

Disney’s stock is currently (as of 2/3/2026) trading near an inflection point - an area which investors have viewed as a buying opportunity.

Before anyone gets too excited, this has also been an area of past breakdowns.

Why should we pay attention to these support/resistance levels? It tells us how large institutional players are viewing the company.

If they fail to come in to buy at these key levels, it is an indication that these large investors don’t find value at the current level (whereas they found value at this level previously).

Which is why we typically see quick and large drops in a stock’s price when support is broken.

While more aggressive traders might be tempted to “test the water” at these levels, I prefer to wait for the price to cross above the cloud.

Using the same parameters from above, after Disney crosses above the cloud, the results tend to be more favorable:

Potential Catalysts

The next couple of months have several “headline” events that could move sentiment.

In my opinion, the CEO transition, which is scheduled for March 18, 2026, is likely to be a key positive or negative moment for the stock, as Wall Street digests a newly refreshed strategic messaging and a clearer sense of priorities under new leadership.

This is where we will see how much confidence Wall Street has in incoming CEO Josh D’Amaro.

Additionally, Disney highlighted the planned March 2026 opening of World of Frozen at Disneyland Paris, which investors may use to gauge international park demand.

Disney Cruise Line is another swing factor: new ship launches can temporarily pressure margins due to ramp costs (ramp costs refer to the high, upfront expenses incurred while preparing a new vessel for service and operating it during its initial, non-peak phase), even if they improve longer-term growth.

Disney noted that the new ship, Disney Adventure, is scheduled for a March 10 maiden voyage; early booking strength and onboard spending will matter for the narrative.

Finally, the next earnings date for fiscal 2Q26 hasn’t been formally confirmed on Disney’s investor relations calendar, but I would expect it to be held early to mid-May 2026.

Investors will be focused on a few core questions:

• Are streaming profits still improving?

• Is sports DTC making tangible progress?

• And are parks and cruises holding up on pricing and spending per guest?

Conclusion

Short-term traders may test current support levels, hoping that large institutional funds still see value at the current levels.

I wouldn’t be surprised to see consolidation in price, including a tighter trading range, as investors wait to hear from incoming CEO Josh D’Amaro as the transition period gets closer and closer.

Disclosures

John Rothe is the owner of ARTAIS Capital Management, LLC (“ARTAIS Capital”), a registered investment advisor offering advisory services in registered states and in other jurisdictions where exempt. Registration does not imply a certain level of skill or training.

The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision.

Investment Risk: Investing in securities involves a significant risk of loss that clients should be prepared to bear. Past performance is not indicative of future results. The discussion of Disney (DIS) is intended to illustrate the Firm’s analytical process and should not be considered a recommendation to buy or sell any specific security.

Hypothetical & Backtested Performance The “Cloud Model” and Ichimoku analysis discussed herein contain hypothetical performance results.

Limitations: Hypothetical results have inherent limitations. They are prepared with the benefit of hindsight and do not involve financial risk or the impact of market liquidity. No hypothetical record can completely account for the impact of financial risk in actual trading.

Methodology: The data showing Disney crossing the “Cloud” since 2000 is based on backtested technical parameters. Actual results during these periods would have been impacted by advisory fees, transaction costs, and reinvestment of dividends, which are not reflected in these hypothetical charts. Gross performance is higher than net performance; the deduction of an annual advisory fee (e.g., 1.00%) would reduce a 10% annual return to approximately 8.91% after 10 years due to compounding.

Technical Analysis & Models The “Cloud Model” is a proprietary tool used by ARTAIS Capital. Technical analysis is only one form of investment oversight and should be used in conjunction with fundamental research. There is no guarantee that the model’s “inflection points” or “support levels” will hold in the future. The proprietary filters used to narrow stock selection are subject to change without notice.

Third-Party Data & Conflicts Information regarding Nielsen ratings, OpenAI/Sora licensing, and Disney’s fiscal reporting was obtained from sources believed to be reliable (e.g., Wikipedia, Nielsen, SEC filings), but its accuracy cannot be guaranteed. This post reflects the opinions of ARTAIS Capital as of February 3, 2026, and is subject to change. The Firm and its affiliates may hold positions in the securities mentioned.

Because tech is such a large portion of the S&P 500’s weight, when mega-cap tech cools off or chops sideways, it can quietly stall the entire index – even if many other stocks are doing fine.

S&P 500 Index

To start, let’s take a look at the S&P 500 index. I’ve highlighted the upper channel. As you can see, it is very well defined, giving us a 7,500 projection level, once the index starts moving higher again.

“once the index starts moving higher again”?

You might be saying, “John, I keep hearing the market is near an all-time high!”

Yes, this is true; however, the index has been in a sideways trading range since October:

Typically, this time of year is when we start the Santa Claus rally cycle, however the lack of upside movement from technology leadership names has stalled the index.

Note: I should mention that other sectors of the market are having their so-called Santa Claus rally – especially small-cap names – the large leadership tech names are just weak in comparison.

A Closer Look at Tech

So, what’s going on with tech?

Taking a look at the SPDR Technology Select Sector Fund ETF (XLK), we can see a few notable developments:

First, XLK has retreated from being short-term overbought, as shown in the Stochastics panel at the bottom of the chart. Below that, a MACD sell signal is also forming – indicating a slowdown in upside momentum.

Second, and more importantly, the ETF is struggling with the cloud model (a.k.a. the Ichimoku Cloud). The Ichimoku cloud tends to act as support and resistance and can give us a nice visual of the current trend.

The tech-heavy QQQ has a similar pattern:

Why does this even matter?

Currently, the largest sector weighting of the S&P 500 index is technology. For the index to move meaningfully higher, we will need technology to start leading the market again. Something it has not done since late October.

S&P 500 Sector Weighting as of July 31, 2025 | Created with Google Gemini

Within the technology sector, NVIDIA has the largest weighting, and the top six names make up a whopping 50% of the XLK ETF:

Status of Current Tech Leaders:

A similar pattern begins to emerge when we take a closer look under the hood of the tech sector. Four of the top five names are struggling with overhead cloud resistance:

NVIDIA (NVDA)

Microsoft (MSFT)

Broadcom (AVGO):

Palantir Technologies (PLTR):

Advanced Micro Devices (AMD):

Is Christmas Canceled? (and What I am Keeping an Eye On)

Not necessarily, especially if you are a non-index investor.

Tactical investors, like myself, have been taking advantage of non-tech sectors.

Consumer Discretionary stocks (XLY) are breaking out to new highs:

Industrials (XLI) are similarly testing new highs, after a multi-month sideways trading pattern (potentially setting up the start of a new upward trend):

Financials (XLF) have broken out to new highs, as well:

…and, within each of these sectors, numerous opportunities are present.

So, is Christmas canceled? Not at all — but it may not look like the typical “index melt-up” investors have become conditioned to expect.

The bigger takeaway is this: when technology is acting as a headwind, the S&P 500 can feel frustratingly stagnant even while opportunities are showing up elsewhere.

That’s why the focus remains on what price is actually doing — whether tech can reclaim leadership and clear key resistance, and whether the sectors currently carrying the market can continue to follow through.

This is exactly the type of environment where a tactical approach can add value: staying flexible, leaning into what’s working, and respecting risk when leadership is missing.

As always, the goal isn’t to predict the next headline — it’s to stay aligned with the trend and avoid getting trapped when market conditions change.

Will the market continue to decline, or is the selling overdone?

This week, I discuss key levels to watch, what signals I am watching, and where this pullback stands compared to other historical market declines.

Was the recent weakness just seasonal, or is the market about to start structurally breaking down?

In this week’s video, I discuss the charts I am watching to help determine if the upward trend in the stock market is still intact.

However, Tech and AI stocks may be in the beginning innings of a move higher, potentially setting up for a breakout of the S&P 500 to new all-time highs.