The US market remains in a secular bull that begins in 2013, and the S&P continues to work higher over time while staying well above the 200-day moving average. Near term, the S&P chops sideways from early December into late February, with seasonality in the back half of February often less supportive.
Under the surface, the NASDAQ weakens: it peaks in late October, prints lower highs, breaks key support, and trades below the 50-day moving average, while remaining above a rising 200-day moving average. Equal weight tells a more constructive story, with healthier participation away from the largest market caps.
Markets outside the US lead. International equities outperform the US since the beginning of 2025, and that outperformance accelerates from late December.
TSX continues to march ahead, supported by its sector mix, and developed markets outside the US post strong January and February performance. Breadth expands across Canada and most global markets, with rising advance-decline trends in developed, emerging, and frontier markets, while US breadth narrows in the optionable universe, including a sharp drop in NASDAQ 100 breadth.
Long-term yields settle down and become less volatile in recent weeks, and the US dollar holds a tight range, reducing disruption across assets. Commodities remain in a long-term bull backdrop: gold stays positive long term but trades choppy after getting extended, and commodities continue to outperform bonds and the equally weighted S&P over the longer trend.
Key takeaways:
Rotation away from US mega-cap tech continues
The NASDAQ Composite and NASDAQ 100 put in highs in October, and the NASDAQ breaks support and trades below the 50-day moving average. Two sell signals show up: a break to a lower low, then another break. Tech exposure stays reduced overall, with a near-term focus on NVIDIA reporting tomorrow.
International markets lead the tape
International equities outperform the US since the beginning of 2025, with momentum accelerating since late December. Strength shows up in the MSCI All World Developed ex-US index, with strong January and February performance and broad gains across many markets outside the US.
Global breadth improves while US breadth narrows
Advance-decline trends rise across developed, emerging, and frontier markets. In the US optionable universe, breadth narrows over the last month or so, and NASDAQ 100 breadth drops from about 80% of stocks in uptrends to the low 40s.
US adds stay on pause while new adds skew international
New US stock additions remain on hold for about four weeks, while most new adds continue to be in international markets, reflecting the narrowing breadth and shifting leadership inside US equities.
Rates and the dollar calm down
The long end of the US bond market behaves better over the last couple of weeks: yields come off a bit and volatility narrows. The US dollar holds a fairly tight range over the last few weeks. Lower rate and FX volatility is less disruptive for markets.
Commodities lead, and positioning stays defensive and diversified
Commodities remain in a long-term bull market, while gold trades in a corrective, choppy phase after getting extended. Money flows into energy and materials, and both areas remain under-owned across typical portfolios. Cash and T-bills stay elevated at roughly 15% to 20% depending on the account. Firm-level geographic exposure sits at approximately 43% Canada, about 28% international and emerging markets, and about 27% US, with reduced tech exposure and more emphasis on industrials, energy, and materials relative to the S&P.
Global Leadership Broadens as US Tech Softens
Earnings season continues to come in better than expected. With roughly 80% of US companies reported, average earnings growth for the quarter is about 8%, and revisions through the balance of the year are generally strengthening. At the index level, the US remains in a secular bull market that begins in 2013. The S&P continues to trend higher over time and remains well above its 200-day moving average, the level that typically defines major pullbacks within a secular bull.
Near term, however, the market chops sideways. From early December into the back half of February, the S&P trades in a range, and seasonality during this period can be less supportive, particularly in election and re-election years. Under the surface, the NASDAQ weakens. It peaks in late October, prints lower highs, breaks support, and trades below the 50-day moving average, while remaining above a rising 200-day. In contrast, equal-weight measures look healthier, indicating that weakness concentrates in the largest market-cap technology names rather than across the entire market.
At a bare-bones level, the NASDAQ Composite and the NASDAQ 100 put in highs in October. The NASDAQ 100 double-tops, and the Composite puts in a lower high in January. The move to a lower low marks one sell signal, and the break of another low marks a second sell signal. That keeps the focus on risk management and on where leadership is actually expanding, rather than on index-level calm.
International Markets Take the Lead
Leadership broadens outside the US. Developed markets outside the US outperform the US on a relative basis since the beginning of 2025, with that outperformance accelerating from late December. January and February post strong returns for the all-world developed ex-US index, and participation expands across many countries. TSX also continues to march ahead, supported by its sector mix, and it has done very well since the NASDAQ makes its high in October.
Europe participates in that leadership shift. The MSCI Eurozone posts two strong months, up about 3% last month and about 3% this month, and it makes a relative turn versus the S&P. The point is not just that non-US markets rally, but that the trend begins to turn on a relative basis, which is often what matters most in allocation decisions.
Asia also shows notable strength. Japan plays catch-up after a long period without new highs, and the recent advance highlights how long cycles can run once leadership changes. Taiwan posts a dynamite February, up 11% for the month, which stands out given that its largest company is Taiwan Semi and tech has been under pressure in other areas. Korea also moves sharply higher in February, up 18% for the month, supported by its mix of financials and memory-related exposure during a period when memory chips are in a boom.
Emerging Markets and Long Cycles
Emerging markets show signs of breaking out after a long period of underperformance. Historical context matters. From 2003 to 2008, emerging markets drive returns while US stocks go nowhere, and that period links closely with strong commodity markets and countries fueling growth in China. Markets move in long cycles, and when leadership shifts after extended underperformance, it can persist.
On a relative basis, emerging markets reverse the prior downtrend only recently, but the move off the lows has been building for about 14 months. After that kind of long underperformance, new money can start to find its way into international equities quickly, especially when committees put fresh capital to work and reconsider tactical positioning at the start of the year.
The valuation backdrop supports the case. A meaningful valuation gap exists between developed and emerging markets versus US stocks, and at the same time, multiples expand alongside improving earnings revisions outside the US. That combination, growing earnings and rising multiples, is what defines a bull market in practical terms.
Breadth, Rates, and the Dollar
Breadth improves globally. Advance-decline trends rise across developed, emerging, and frontier markets, reinforcing that participation broadens beyond a narrow set of names. Canada shows expanding breadth across small and large caps, and globally most countries participate, with India noted as a laggard.
In contrast, US breadth narrows in the optionable universe. That narrowing shows up clearly in the NASDAQ 100, where breadth comes down from roughly 80% of stocks in uptrends to the low 40s. When breadth narrows and leadership becomes less stable, it becomes harder to justify adding new exposure simply because the index appears calm.
That is why positioning shifts at the margin. New US stock additions pause for roughly four weeks, while most new adds continue to skew toward international markets. The question remains straightforward: where does the next incremental dollar go, given the trends in relative performance, breadth, and leadership?
Rates and FX volatility also matter. The long end of the US bond market behaves better in recent weeks, and long-term yields become less volatile. When long-term rates settle down, the reduced volatility is less disruptive for equities and other risk assets. The US dollar also holds a relatively tight range over the last few weeks, which further supports steadier cross-asset conditions.
Commodities, Energy, and Materials
Commodities remain in a long-term bull backdrop. January delivers a strong move and then a pullback, followed by early-February weakness that stabilizes into the middle of the prior range. Gold remains very positive over a longer horizon but becomes extended and chops around in the near term. Silver runs to $120 an ounce, pulls back sharply, and then retraces a portion of that move. Even in a corrective period where the market gets a bit frothy, the longer-term picture for gold as an asset remains constructive.
The broader regime shift matters. Gold turns up relative to US stocks in 2000, outperforms while US stocks go nowhere for the next decade, then underperforms when US stocks take off in 2012. Over the last three years, gold again begins to outperform, raising questions about what that means for other assets and how investors allocate across the major buckets.
Industrial commodities add to the message. Copper starts a new bull market roughly six months ago and continues to look bullish. Steel breaks out about four months ago. Oil challenges the upper end of its range, and while geopolitical risk can influence oil in the short run, energy stocks strengthen well before oil shows clear strength. The long-term chart of commodities versus bonds continues to show commodities outperforming since 2020, and commodities versus the equally weighted S&P outperform since 2021.
Positioning across the investment industry remains part of the setup. Commodity exposure stays exceptionally low in the average portfolio manager’s mix, and energy remains underweight even after recent inflows. When under-owned asset classes begin to perform, those cycles can last.
What Leadership Looks Like in Practice
Sector leadership reinforces the theme. Financials remain important, but internal dispersion increases. Digital payments and fintech struggle, while regional banks hold up well, and select international banks act resiliently. Industrial leadership remains clear, supported by sharply improving earnings expectations. Technology remains a source of concentration risk, especially where relative strength breaks down, even as some hardware-linked areas behave better.
The overarching message stays consistent across the webcast: leadership broadens globally, breadth improves outside the US, and capital flows increasingly favor energy, materials, and international markets. In a market that looks calm at the index level but shows meaningful divergence underneath, discipline comes from following relative strength, breadth, and the areas where earnings revisions and multiples expand.