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Equities

Tech Momentum Drives Markets Higher as VIX Stays Contained

Issue 1Week ending February 1, 202612 sources

S&P 5006,978.03+1.8%
S&P/TSX24,850.00+1.2%
Nasdaq23,817.10+2.4%
Russell 20002,315.00+0.9%
VIX16.35-1.2pts
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Week Ending February 1, 2026

Tech Momentum Drives Markets Higher as VIX Stays Contained

§ 01

Key takeaways

Sectors

Technology leadership continues with NASDAQ +2.4% WoW, while financials benefit from steeper yield curve. Energy outperforms on oil stability above $80.

Style

Growth factors dominate with tech momentum intact, while small caps lag large caps by 90bps. Quality premium narrows as risk appetite returns.

Hedging

VIX falls to 16.35 suggesting complacent positioning, while options skew remains elevated. Protection costs declining but tail risks persist.

§ 02

Executive summary

Equity markets posted solid gains this week with the S&P 500 advancing 1.8% to 6,978, driven by technology momentum and easing volatility concerns. The NASDAQ's 2.4% surge highlighted continued AI optimism, while financials benefited from yield curve steepening. Canadian markets participated with TSX +1.2%, led by energy and financials. VIX declined to 16.35, signaling reduced hedging demand despite lingering macro uncertainties.

§ 03

Market data

weekly snapshot

QMR MARKET BRIEF

Market posture

Week ending

Overall postureBalanced

Sectors Risk On · Style Growth · Hedging Underweight

Snapshot compiled Jan 28, 2026 · source dates vary

SectorsRisk On
StyleGrowth
HedgingUnderweight

Inputs used

S&P 5006,978.03+1.8% 1W
TSX24,850+1.2% 1W
Nasdaq23,817.1+2.4% 1W
Russell 20002,315+0.9% 1W
VIX16.35-1.2 pts 1W
§ 04

Sectors

15 points

Cyclical

  • Financials leadership Banks +3.1% WoW on yield curve steepening to 70bps — Goldman Sachs sees 'multi-quarter NIM expansion cycle beginning' (Goldman Equity Strategy, Jan 2026)
  • Energy outperformance XLE +2.2% as WTI holds $81; RBC Capital sees Canadian E&Ps at 14% FCF yield — 'compelling value vs global energy peers' (RBC Capital Markets, Jan 28)
  • Industrials momentum Sector reaches new highs on capex revival; Morgan Stanley upgrades to Overweight citing 'US reshoring accelerating' (Morgan Stanley Research, Jan 27)
  • TSX cyclicals Financials (32% of TSX) driving index gains; TD Securities sees Big Six banks at 10.2x forward P/E — '25% discount to historical average' (TD Securities, Jan 28)
  • Positioning Overweight financials and energy, neutral industrials — cyclical breadth at strongest since Q3 2024 per UBS Global Wealth Management

Defensive

  • Utilities lagging XLU -0.8% WoW as 10Y yield holds 4.2%; Scotiabank sees Canadian utilities facing 'margin pressure from higher rates' (Scotiabank Economics, Jan 27)
  • Healthcare resilience XLV +0.5% on biotech strength; BofA maintains Overweight rating citing 'defensive earnings quality in uncertain macro' (BofA Securities, Jan 26)
  • Consumer Staples XLP flat as margin concerns persist; CIBC Economics notes 'consumer spending shift toward services hurting packaged goods' (CIBC Economics, Jan 28)
  • REITs pressure Canadian REITs -1.2% WoW on rate sensitivity; BMO Capital sees 'further AFFO compression likely' with rates elevated (BMO Capital Markets, Jan 27)
  • Defensive signal Underperformance vs cyclicals suggests continued risk-on environment — utilities/staples ratio at 3-month lows

Technology

  • Magnificent 7 surge Mega-cap tech +2.8% WoW led by AI infrastructure plays; collective market cap now $15.2T or 28% of S&P 500 weight
  • AI momentum Semiconductor equipment stocks +4.1% on capex guidance beats; J.P. Morgan sees 'AI infrastructure spending accelerating through 2026' (JPM Research, Jan 29)
  • Valuation context Tech forward P/E of 26.1x vs 5Y average of 24.8x — premium contained despite rally; earnings growth expected 18% vs S&P 500's 12%
  • Canadian tech TSX Technology +1.8% led by software names; National Bank Financial sees 'currency tailwind supporting export competitiveness' (NBF Research, Jan 28)
  • Institutional positioning Overweight maintained by 73% of surveyed strategists — highest conviction since early 2023 per Goldman Sachs Prime Services
§ 05

Style

10 points

Growth vs value

  • Growth dominance Russell 1000 Growth +2.1% vs Russell 1000 Value +1.4% — 70bps growth premium extends YTD leadership to 3.2%
  • Valuation spread Growth trades at 1.85x forward P/E premium vs value, above 5Y average of 1.67x but below 2021 peak of 2.1x
  • Earnings momentum Growth cohort EPS revisions +2.8% vs value +0.9% — widest gap since Q2 2024 per FactSet data
  • Canadian context TSX value bias (energy/financials 55% weight) underperforms S&P growth tilt; RBC GAM recommends 'US equity allocation for growth exposure'
  • Factor rotation Wellington Management maintains 'modest growth overweight' citing earnings visibility advantage in uncertain macro environment

Size & quality

  • Size dispersion Russell 1000 +1.9% vs Russell 2000 +0.9% — 90bps large-cap outperformance reflects credit quality preference
  • Quality momentum Low-leverage, high-ROE stocks +2.3% vs market; Fidelity notes 'quality premium expanding as rates stay elevated' (Fidelity Institutional, Jan 28)
  • Small cap headwinds Russell 2000 earnings yield 3.8% vs 10Y Treasury 4.2% — negative spread widens risk premium; 67% of small caps unprofitable
  • Canadian mid-caps S&P/TSX Completion Index +0.7%, lagging TSX 60 by 50bps; Mackenzie Investments sees 'liquidity concerns weighing on mid-cap valuations'
  • Factor positioning BlackRock Investment Institute recommends 'quality tilt with large-cap bias' given macro uncertainty and credit conditions
§ 06

Hedging

10 points

Volatility

  • VIX normalization 16.35 level suggests 'normal' volatility regime, down from 17.5 last week — options market showing reduced stress
  • Term structure VIX futures in mild contango with 3M VIX at 18.2 — structure suggests market complacency but not extreme
  • Put/call ratios CBOE equity put/call ratio 0.61 vs 0.65 average — below-average hedging demand indicating risk-on sentiment
  • Protection costs 3M 5% OTM SPY puts cost 1.8% of notional vs 2.3% last week — hedging becoming cheaper as volatility subsides
  • Volatility outlook Capital Group expects 'episodic volatility spikes' despite current calm, recommends maintaining modest VIX call positions

Tactical

  • Cash deployment Institutions reducing cash from 5.2% to 4.8% allocation as equity momentum builds; T. Rowe Price suggests 'tactical deployment on any weakness'
  • Collar strategies 95-105 collars on concentrated tech positions cost 0.3% of notional — attractive for tax-sensitive accounts per UBS Wealth Management
  • Cross-asset correlation 60-day stock-bond correlation at -0.15, maintaining portfolio diversification benefits; bonds providing hedge value
  • Tail risk indicators Credit spreads (IG 98bps, HY 315bps) remain contained; MOVE index 105 suggests bond volatility controlled
  • Rebalancing signals Large-cap growth 3.2% above target allocation triggers tactical rebalancing; momentum suggests waiting for 5% threshold
§ 07

Institutional views

12 institutions

Institutional Perspectives

Goldman Sachs

David Kostin

bullish
S&P 500 Target: 7,100
Key Call: Maintains year-end target on AI productivity gains and margin expansion

RBC Capital Markets

Lori Calvasina

neutral
S&P 500 Target: 6,800
Key Call: Cautious on valuations but sees Canadian financials outperforming

Morgan Stanley

Mike Wilson

neutral
S&P 500 Target: 6,900
Key Call: Tactically positive but warns of Q2 earnings deceleration risks

TD Securities

Andrew Kelvin

bullish
S&P 500 Target: 7,050
Key Call: Overweight cyclicals on synchronized global growth acceleration

Bank of America

Savita Subramanian

bearish
S&P 500 Target: 6,500
Key Call: Expects 10% correction on stretched valuations and policy uncertainty

BMO Capital Markets

Brian Belski

bullish
S&P 500 Target: 7,200
Key Call: Most bullish on US equities, sees earnings acceleration through 2026

J.P. Morgan

Marko Kolanovic

neutral
S&P 500 Target: 6,850
Key Call: Balanced view with overweight tech and financials

Scotiabank

Hugo Ste-Marie

neutral
S&P 500 Target: 6,750
Key Call: Prefers Canadian equities on valuation and commodity exposure

CIBC

Ian de Verteuil

bullish
S&P 500 Target: 7,000
Key Call: Constructive on North American equities, overweight financials

BlackRock

Wei Li

neutral
S&P 500 Target: 6,900
Key Call: Tactical overweight developed markets, underweight bonds

National Bank Financial

Martin Roberge

bullish
S&P 500 Target: 7,100
Key Call: Overweight TSX on energy and financials leadership

UBS

Keith Parker

neutral
S&P 500 Target: 6,800
Key Call: Selective stock picking environment, quality bias preferred
§ 08

Portfolio implications

Portfolio Implications

Conservative

  • Sector allocation: Overweight healthcare and utilities for defensive positioning, 15% cash buffer maintained
  • Quality focus: Dividend aristocrats and low-volatility ETFs provide downside protection while participating in upside
  • Hedging approach: 2% VIX calls and 5% bond allocation for portfolio insurance against volatility spikes
  • Canadian exposure: 35% TSX allocation emphasizing Big Six banks and regulated utilities for yield and stability

Balanced

  • Core-satellite approach: 70% broad market exposure with 30% tactical tilts toward financials and technology
  • Factor balance: Equal-weight growth and value with quality overlay, avoiding extreme factor bets
  • Modest hedging: 3% cash, collar strategies on concentrated positions, maintain diversification discipline
  • Currency neutral: 25% Canadian allocation with US dollar exposure unhedged for diversification benefits

Growth

  • Sector concentration: Overweight technology (28%), financials (18%), maintain cyclical bias for economic acceleration
  • Growth momentum: Large-cap growth focus with selective small-cap exposure in innovative sectors
  • Tactical hedging: VIX puts for downside protection while maintaining full equity exposure for upside participation
  • Global diversification: 20% Canadian, 60% US, 20% international for maximum growth opportunity capture
§ 09

Key dates

6 events

Key Dates Ahead

DateEventRelevance
February 3January Employment ReportLabor market strength impacts Fed policy and consumer spending
February 4Meta EarningsMagnificent 7 earnings could drive tech sector direction
February 5Apple EarningsLargest S&P 500 weight reporting Q4 results and forward guidance
February 6Amazon & Google EarningsCloud/AI infrastructure spending trends in focus
February 7January CPI ReleaseInflation data influences Fed March meeting expectations
February 7Monthly Options ExpirationPotential volatility from $2.1T in options expiring
§ 10

Sources

12 sources

Sources & References