Hey, Ross here:
Welcome to a new week and month.
February was historically a choppy month for the markets – and this year was no different.
Volatility surged. The market was choppy. And all the major indexes ended the month lower than when it started.
And with geopolitical tensions ramping up – March could prove to be another volatile month.
Let’s start by looking at what the institutional investors have been up to.
Chart of the Day
This is the National Association of Active Investment Managers (NAAIM) Exposure Index.
It tells us how exposed active fund managers are to US stocks.
And as the chart shows…
The institutional investors have been sharply pulling back their exposure to US stocks.
In fact, their current exposure is about the same level as May 2025 – when the markets were still emerging from the big tariff selloff.
This tracks with the choppy sideways action we saw throughout February.
Remember, the institutions are the primary market movers.
If they’re not in play, there just isn’t enough juice for the market to move higher.
In particular, these institutions have been trimming their exposure to the largest tech stocks…
Which is why, even though the market-cap weighted indexes were down for the month…
The Equal-Weight S&P 500 was up a robust 3%.
You can see below how it’s trended upward nicely, supported by its 21-day moving average (blue line on chart).
And that uptrend has been consistent not just for the past month, but since late November last year.
As a matter of fact, the outperformance of the Equal Weight S&P 500 versus the regular S&P 500 is the widest in 36 years.
And that leads us into today’s insight below.
Insight of the Day
Don’t be surprise if we see a “Big Tech rebound” in March.
Nvidia sold off after its latest earnings – even though it once again overdelivered compared to expectations.
Most of the other Big Tech companies have also seen similar selloffs despite strong earnings.
Obviously, the dip in their prices means a lower valuation multiple.
But has it gone too far? Look at the chart below.
It shows the forward P/E ratio of the Magnificent 7 (sans Tesla) versus the Consumer Staples sector.
The Mag 7 are some of the most offensive high-growth stocks on the market. Consumer Staples is defensive.
And yet, the forward P/E ratio of both are now about equal.
This doesn’t seem like a very sustainable situation to me.
So don’t be surprised if we see a “Big Tech rebound” in March.
Now, I am NOT suggesting that you go out and start loading up on these stocks right now.
Because even if the Big Tech rebound happens…
It doesn’t mean that this is the best opportunity we should be pouncing on this month.
I just wrote a blog post talking about how you can set up an easy routine to scan for the opportunities you should be targeting.
With inflation still sticky…
The escalation of conflict in Iran…
And continued uncertainty around the AI trade…
I believe this routine is more important than ever.
So click here to read about this winning trading routine now.
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