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Equities

Equities Rally on Fed Dovish Tilt, Tech Leadership Broadens

Issue 3Week ending March 1, 202612 sources

S&P 5006,908.86+1.8%
S&P/TSX24,325.40+2.1%
Nasdaq22,878.38+2.3%
Russell 20002,387.45+3.1%
VIX18.63-2.1pts
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Week Ending March 1, 2026

Equities Rally on Fed Dovish Tilt, Tech Leadership Broadens

§ 01

Key takeaways

Sectors

Risk-on rotation accelerated with financials and energy leading on steeper yield curve and commodity strength — cyclicals at multi-month highs versus defensives.

Style

Growth factor extended leadership with 3.2% outperformance vs value as tech earnings momentum broadened beyond mega-cap AI plays to enterprise software and semiconductors.

Hedging

Volatility regime remains normal with VIX at 18.6, but protection costs declining as term structure normalizes — tactical hedging opportunity diminishing.

§ 02

Executive summary

Equities surged this week with the S&P 500 gaining 1.8% and TSX climbing 2.1% as Fed Chair Powell's dovish commentary sparked a risk-on rotation into cyclicals and growth. Small caps led with Russell 2000 up 3.1%, while VIX declined 2.1 points to 18.6 as volatility concerns eased. Institutional strategists are increasingly constructive on equities, with Goldman Sachs raising S&P 500 target to 7,200 citing earnings momentum broadening beyond mega-cap tech.

§ 03

Market data

weekly snapshot

QMR MARKET BRIEF

Market posture

Week ending

Overall postureBalanced

Sectors Risk On · Style Growth · Hedging Underweight

Snapshot compiled Feb 27, 2026 · source dates vary

SectorsRisk On
StyleGrowth
HedgingUnderweight

Inputs used

S&P 5006,908.86+1.8% 1W
TSX24,325.4+2.1% 1W
Nasdaq22,878.38+2.3% 1W
Russell 20002,387.45+3.1% 1W
VIX18.63-2.1 pts 1W
§ 04

Sectors

15 points

Cyclical

  • **Financials leadership ** Banks +4.2% WoW as 10Y-2Y spread steepened to 60bps — RBC sees Canadian banks at 'compelling 9.8x forward P/E vs 10Y average of 12.1x' (RBC Capital Markets, Feb 2026)
  • **Energy momentum ** XLE +3.7% with WTI holding $78; Scotiabank upgrades Canadian E&Ps to Overweight citing '18% average FCF yield at current strip pricing' (Scotiabank Global Economics, Feb 2026)
  • **Industrials breakout ** Sector reached 52-week highs on infrastructure spending optimism; TD Securities sees 'multi-year capex super-cycle driving 15% earnings CAGR' (TD Securities, Feb 2026)
  • **Materials surge ** Base metals rally lifted sector +3.4%; BMO Capital highlights 'copper supply deficit supporting TSX mining at 12x P/E discount to S&P industrials' (BMO Capital Markets, Feb 2026)
  • **Positioning shift ** Overweight financials and energy, market-weight industrials — cyclical breadth strongest since Q4 2024 per Goldman Sachs factor analysis

Defensive

  • **Utilities lagging ** XLU -1.2% as rate normalization pressures yield proxies; National Bank sees 'sector vulnerable with 4.2% dividend yield vs 4.8% 10Y Treasury' (National Bank Financial, Feb 2026)
  • **Healthcare resilience ** XLV flat despite defensive rotation out; Morgan Stanley maintains Overweight on 'biotech innovation cycle accelerating with 12% revenue growth' (Morgan Stanley Research, Feb 2026)
  • **Staples weakness ** Consumer staples -0.8% as margin pressures persist; CIBC Economics notes 'volume weakness offsetting pricing power in food/beverage' (CIBC Economics, Feb 2026)
  • **REIT pressure ** Rate sensitivity weighed on REITs -2.1%; Desjardins sees 'Canadian REITs at 14x FFO vs 12x 5Y average — valuation stretch concerning' (Desjardins Economic Studies, Feb 2026)
  • **Rotation signal ** Defensive underperformance of -180bps vs market confirms risk-on regime — rotation out of bond proxies accelerating

Technology

  • **Magnificent 7 broadening ** NVDA +5.2%, MSFT +3.1%, GOOGL +2.8% but leadership expanding beyond AI giants; Fidelity notes 'enterprise software up 4.1% as capex normalizes' (Fidelity Canada, Feb 2026)
  • **Semiconductor strength ** SMH +4.7% on inventory normalization signals; UBS sees 'memory pricing inflection supporting 25% earnings growth in H2 2026' (UBS Research, Feb 2026)
  • **Valuation normalization ** Tech forward P/E at 26.2x vs 5Y average of 24.8x — premium compressed from 28.5x in January; Mackenzie sees 'multiple expansion sustainable on earnings delivery' (Mackenzie Investments, Feb 2026)
  • **Cloud momentum ** Hyperscaler capex guidance strong with AMZN, GOOGL raising 2026 infrastructure spend 30%+ YoY; BlackRock overweights 'AI infrastructure beneficiaries' (BlackRock Investment Institute, Feb 2026)
  • **Canadian tech ** TSX tech +3.4% with Shopify, Constellation Software leading; RBC GAM sees 'compelling valuations in Canadian SaaS at 4.2x revenue vs US peers at 7.8x' (RBC GAM, Feb 2026)
§ 05

Style

10 points

Growth vs value

  • **Growth dominance ** Russell 1000 Growth +2.9% vs Russell 1000 Value -0.3%, extending growth outperformance to 8.4% YTD; Wellington sees 'earnings growth differential widening to 18% vs 4%' (Wellington Management, Feb 2026)
  • **Valuation spread ** Growth trading at 1.7x premium to value vs 1.5x 10Y average, but J.P. Morgan notes 'justified by 4x earnings growth differential and margin expansion' (J.P. Morgan Private Bank, Feb 2026)
  • **Factor momentum ** Quality growth leading with low-leverage, high-ROE names up 3.8%; Capital Group emphasizes 'sustainable growth over cyclical value in late-cycle environment' (Capital Group, Feb 2026)
  • **Canadian context ** TSX inherent value bias (financials 32%, energy 18%) underperformed S&P growth tilt by 70bps this week; CI Global sees 'currency hedge benefit for CAD investors in US growth' (CI Global Asset Management, Feb 2026)
  • **Positioning ** Maintain growth overweight but add value exposure on relative cheapness — T. Rowe Price recommends '70/30 growth/value vs 60/40 historical benchmark'

Size & quality

  • **Small cap leadership ** Russell 2000 +3.1% vs Russell 1000 +1.9% as rate cut expectations favor high-beta; Bank of America sees 'small caps at 14.2x forward P/E vs large at 21.1x — biggest discount since 2020' (BofA Global Research, Feb 2026)
  • **Quality momentum ** High-profitability, low-debt cohort +3.2% as credit conditions supportive; Invesco highlights 'quality factor at 12-month highs with ROE >15% names leading' (Invesco Insights, Feb 2026)
  • **Credit sensitivity ** Small cap outperformance coincides with IG spreads tightening 8bps to 95bps over Treasuries; Franklin Templeton notes 'credit availability crucial for small cap earnings recovery' (Franklin Templeton, Feb 2026)
  • **Canadian mid-caps ** S&P/TSX Completion +2.8% with industrials, materials leadership; AGF sees 'compelling opportunities in TSX mid-cap at 13.1x P/E vs large cap at 15.8x' (AGF Investments, Feb 2026)
  • **Factor positioning ** Overweight small cap quality over small cap value — focus on profitable, growing companies with strong balance sheets benefiting from dovish Fed
§ 06

Hedging

10 points

Volatility

  • **VIX normalization ** At 18.6 (down from 20.7), VIX remains in normal 15-20 range but term structure flattening suggests complacency building; AQR notes 'volatility risk premium compressed to 2.1%' (AQR Capital Management, Feb 2026)
  • **Term structure ** VIX term structure in contango with 3M VIX futures at 19.8 vs spot 18.6 — typical of low-stress environments but GMO warns 'complacency precedes volatility spikes' (GMO Research, Feb 2026)
  • **Options positioning ** Put/call ratio at 0.67 vs 0.74 average, indicating reduced hedging demand; CBOE data shows '$15bn in put protection expired unexercised this week'
  • **Protection cost ** 3-month 5% OTM SPY puts cost 1.1% of notional vs 1.4% last week — hedging becoming cheaper but Bridgewater sees 'asymmetric risk/reward favoring protection' (Bridgewater Associates, Feb 2026)
  • **Regime assessment ** Volatility environment supportive for equity risk-taking but institutional hedging unwinds suggest potential for sharp reversals on negative surprises

Tactical

  • **Cash deployment ** Reduce cash from 8% to 5% allocation as risk-on momentum builds; State Street recommends 'tactical equity add while maintaining dry powder for corrections' (State Street Global Advisors, Feb 2026)
  • **Collar strategies ** Consider protective collars on concentrated tech positions using June expiry; MFS suggests '5% OTM put/call collars cost-neutral with upside to 10%' (MFS Investment Management, Feb 2026)
  • **Cross-asset correlation ** Stock-bond correlation at -0.15 vs 0.25 YTD average — diversification benefits restored as growth/inflation balance normalizes
  • **Tail risk indicators ** Credit spreads, MOVE index at benign levels but Research Affiliates warns 'tail risk underpriced with equity skew at 10Y lows' (Research Affiliates, Feb 2026)
  • **Rebalancing trigger ** Equity allocations 3-5% above strategic weights suggest tactical rebalancing opportunity if momentum stalls — maintain discipline on risk budgets
§ 07

Institutional views

12 institutions

Institutional Perspectives

Goldman Sachs

David Kostin

bullish
S&P 500 Target: 7,200
Key Call: Raised target from 7000 on earnings broadening beyond tech — sees 12% EPS growth in 2026

RBC Capital Markets

Lori Calvasina

bullish
S&P 500 Target: 7,100
Key Call: Overweight financials and energy on yield curve steepening and commodity strength

Morgan Stanley

Mike Wilson

neutral
S&P 500 Target: 6,800
Key Call: Cautious on valuations but sees selective opportunities in healthcare innovation

TD Securities

Andrew Kelvin

bullish
S&P 500 Target: 7,000
Key Call: Upgrade industrials on infrastructure super-cycle — sees multi-year capex boom

BMO Capital Markets

Brian Belski

bullish
S&P 500 Target: 7,250
Key Call: Most bullish on Canadian equities vs US — TSX to outperform on value gap closure

Bank of America

Savita Subramanian

neutral
S&P 500 Target: 6,900
Key Call: Prefer small caps over large caps on valuation — sees 14x vs 21x P/E discount as extreme

J.P. Morgan

Dubravko Lakos-Bujas

bullish
S&P 500 Target: 7,150
Key Call: Growth over value justified by earnings differential — overweight quality growth names

Scotiabank

Hugo Ste-Marie

bullish
S&P 500 Target: 6,950
Key Call: Upgrade energy sector to Overweight — Canadian E&Ps offer 18% FCF yields

UBS

Keith Parker

neutral
S&P 500 Target: 6,850
Key Call: Overweight semiconductors on inventory cycle turn and memory pricing recovery

CIBC

Ian Pollick

bullish
S&P 500 Target: 7,050
Key Call: Fed dovish tilt supports risk assets — prefer cyclicals over defensives

National Bank Financial

Stéfane Marion

neutral
S&P 500 Target: 6,800
Key Call: Cautious on utilities given rate environment — prefer real assets exposure

Desjardins

Jimmy Jean

bullish
S&P 500 Target: 7,000
Key Call: Canadian financials attractive at 9.8x P/E vs US at 13x — recommends overweight
§ 08

Portfolio implications

Portfolio Implications

Conservative

  • **Sector tilt:** Reduce utilities to neutral, maintain healthcare overweight — focus on dividend sustainability over yield
  • **Factor:** Quality bias with focus on profitable, low-leverage names — avoid high-beta defensives
  • **Hedging:** Maintain 3-5% cash, consider protective puts on core equity positions using 3-month expiry
  • **Canadian:** 65% TSX / 35% S&P allocation to benefit from TSX value discount and potential CAD strength

Balanced

  • **Sector tilt:** Modest overweight in financials and technology, underweight utilities and consumer staples
  • **Factor:** 65% growth / 35% value allocation tilted toward quality names in both factors
  • **Hedging:** Deploy excess cash but maintain 3% for opportunities — consider collar strategies on large positions
  • **Canadian:** Currency hedge 50% of US exposure to balance growth access with volatility reduction

Growth

  • **Sector tilt:** Significant overweight technology and industrials, add energy exposure on commodity strength
  • **Factor:** 80% growth / 20% value with small cap growth emphasis — Russell 2000 Growth allocation
  • **Hedging:** Minimal cash drag, use systematic covered calls to generate income on appreciated positions
  • **Canadian:** 40% TSX / 60% S&P to maximize growth exposure while maintaining home bias — unhedged for FX upside
§ 09

Key dates

5 events

Key Dates Ahead

DateEventRelevance
March 3February Employment Report (US)Critical for Fed rate path — consensus 185K jobs added
March 4Bank of Canada Rate DecisionExpected hold at 3.75% but dovish guidance possible
March 5NVIDIA GTC Conference beginsAI roadmap updates could drive tech sector momentum
March 6February CPI (Canada)Inflation data key for BoC policy path
March 7Russell Index RebalancingQuarterly rebalancing may drive factor rotation flows
§ 10

Sources

12 sources

Sources & References