Week Ending February 1, 2026

Tech Momentum Drives Markets Higher as VIX Stays Contained

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Week Ending February 1, 2026

Tech Momentum Drives Markets Higher as VIX Stays Contained

Executive Summary

📊 Overview

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.

🏭 Sectors

The NASDAQ's 2.4% surge highlighted continued AI optimism, while financials benefited from yield curve steepening.

📐 Style

Canadian markets participated with TSX +1.2%, led by energy and financials.

🛡️ Hedging

VIX declined to 16.35, signaling reduced hedging demand despite lingering macro uncertainties.

Market Snapshot

IndexLevelWeekly Change
S&P 5006,978.03+1.8%
TSX Composite24,850+1.2%
NASDAQ23,817.1+2.4%
Russell 20002,315+0.9%
VIX16.35-1.2 pts

Market Sentiment

Sectors

Risk-on

Style

Growth

Hedging

Underweight

Sectors — 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

Sectors — 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

Sectors — 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

Style — 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

Style — 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

Hedging — 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

Hedging — 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

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

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

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

Sources & References