Wild week for stocks as capex takes front stage; only the best in class in the AI race can thrive. The collective capex spending of the big 4 (Alphabet, Amazon, Meta, and Microsoft) will exceed $600B in 2026, leaving Apple as a sole haven in large cap tech. Earnings continue to make further progress, reaching 13.0% for 4Q25. All eyes on the delayed January labour report on Wednesday, and on US CPI on Friday. The biggest tail risks are the US Economy falling into a recession (20% chance in 2026), resurging inflation, revenues/earnings not matching forecasts, the Fed not delivering on its easing cycle, a surge in long bond yields coupled with a USD crash, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (very high multiples).

Major market events 9th – 13th February 2026

Economic data highlights of the week

Mon: EU ECB President Lagarde Speaks

Tue: US ADP Emplyoment Change Weekly, US Retail Sales (12/25), US Atlanta Fed GDPNow (4Q25)

Wed: JP – Holiday, CN CPI (1/26), CN PPI (1/26), US Nonfarm Payrolls (1/26), US Average Hourly Earnings (1/25), US Unemployment Rate (1/26), US Federal Budget Balance (1/26)

Thu: UK GDP (4Q25), UK Manufacturing Production (12/25), IN CPI (1/25), US Initial Jobless Claims, US Fed’s Balance Sheet

Fri: CH – CPI (1/26), SP CPI (1/26), EU GDP (4Q25), US CPI (1/26)

Performance Review

Source: Google

InflectionPoint reports:

* Down, but not out – and so much for telling us that February was a volatile month for stocks! Another key reporting week went out with two more bangs as Alphabet and Amazon reported. The issue was all about (massive) capex and less about the actual results, and other than capex’ own massive size, its frightening rate of growth. AI is finally here, and like in a Formula 1 race, the various contenders are positioning to come on top – with no price cap to respect. The more you spend, the more the market punishes you, particularly if the rate of growth of your cloud business is inferior to the rate of growth of your spending. Regarding the big 4 (Microsoft, Meta, Alphabet and Amazon) the analysts seriously underestimated capex for 2026, and I believe this is a trend that is going to last for several years, if we listen to the words of Nvidia CEO Jensen Huang, who thinks capex is necessary and that it will take 7-8 years to build the AI infrastructure. Meta, in his opinion, is the company that made the best use of AI, but it was Alphabet, with the release of Gemini 3 in December 2025, which really turned heads. Microsoft and Amazon are trailing so far, while spending the same significant amount of money of the others – respectively, an estimated $140B and $200B. The big four alone, in one year, have a capex of more than $600B, and it has been estimated that there are less than 100 companies in the S&P 500 who can command a market cap greater than that staggering amount. Another controversy was the fall of several software companies due to a release from not yet public Anthropic, with concerns AI can and will disrupt so many of today’s jobs. Part of that is true, if I point out that Amazon is cutting over 30,000 employees, as part of an efficiency round to spend more money in Capex. As much as this brought the Nasdaq down on a YTD, the amazing performance of the Dow Jones reminds us that markets are alive and well. The knee-jerk reaction shows that both the street and investors have yet to digest capex, because in some cases (Alphabet) numbers were actually great. Of course, due to high valuations, market pundits shoot first and ask questions later. At the moment, Apple seems to be a safe haven, as it is not yet involved in AI directly (it will use Gemini to make Siri more interactive), but this is something that could hit them at a later point, even though the numbers were impressive, with the highest number of iPhones sold on record. Even Nvidia, for which demand is ‘sky-high’, has been punished in this context rather than driving the stock to 200 and up. It is crystal clear now that the AI capex trend won’t go bust in 2026, and it is looking increasingly likely that it will continue to last for 3-5 more years. Apart from all the rumours on OpenAI, which remains private and unprofitable (and the market does not like that), investors want companies which are spending to build their AI features to show a clear path to significant returns from their lofty investments. All companies that are seen as spending without immediate returns (obviously Oracle, but joined by a range of AI and cybersecurity plays), were punished. And yet earnings, somehow, did shine, increasing growth estimates for 4Q25 once again, coupled with a slight multiple dilution. I have been saying that the market, near term, cannot count on more support from the Fed (more on that later), and therefore earnings and guidance are of paramount importance. I was really impressed by the market resilience last Friday, in which stocks managed to stage a huge rebound even with Amazon trading 6% down (and more) after its report. The USD has a relatively stable week trading above 1.18 versus the EUR, and it was a great change over the previous week. I wonder if next week’s CPI – let alone the once delayed January labour report – can provide more clarity at a time when European Inflation is just 1.7% and perfectly on target. The JPY lost some ground versus all major currencies last week after the US denied that it was intervening in currency markets, and may be weak tomorrow after the current PM Sanae Takaichi’s landslide election victory. It is widely expected that the US Central Bank will continue to be on hold until the June meeting, which will be the first headed by Warsh, even though it had two dissenters (Waller and Miran) who would have wanted to cut rates in January. The economic forecasts continue to be good, and if there is no recession, rate cuts are equities’ best friend. It is still very important that the independence of the Fed is preserved, as a guarantee of the US’s own credibility. Recent examples of rates being set by the government (such as in the UK in the 1990s) didn’t produce a great outcome. Returning to the economy, the most important data to watch will change: less inflation (with the latest CPI figures slightly better than expected, even though they were at 3%), and more jobs. The overall feeling is that earnings throughout the year were much, much better than investors thought, and the fear of the slowdown didn’t quite materialise – so far. While I admit – for the second time – that the optimistic in me was ready to concede defeat following the brilliant Alphabet results, the action last Friday did save the day for now. Hence, I’m still keeping equities to buy (with the famous 3% weekly stop), keeping US bonds to hold, and European bonds to buy (with the notable exception of France). Valuations matter: Japan has really impressed with its performance under new PM Sanae Takaichi, and it would be well worth considering to include the Asian country in portfolios, but I still recommend hedging the JPY. Due to the beforementioned landslide win, I expect the Japanese Equity Markets to continue its powerful run this year, the JPY to weaken, and bonds to react to policy announcements. How the Japanese PM approaches fiscal discipline will make the difference on whether she is going to be the new Margaret Thatcher, or rather the new Liz Truss (an opinion voiced by Bloomberg columnists at the time of Takaichi’s election as leader of the LDP). Any case it goes, it’s a ‘brave new world’ for Japan, as the last 30 years of policy and deflation/low inflation are completely wiped out.

* GDP forecasts for 4Q25 are good, with the Atlanta and New York Fed finally in agreement on a positive direction. The current P/E ratio of 21.5x is above the average P/E ratio of the last 5 years at 20.0x and the 10-year average at 18.8x. As the multiple held throughout 2025, I believe that it should hold over the next 12 months, if the economy performs similarly and there are no major geopolitical displacements; it is the same assumption I had back in 1999, when the multiple was 24x. That multiple level lasted for the good part of almost two years, and despite the fall in 1H00, technology stayed strong through the summer, until the Intel preannouncement in September sealed their demise and gave way to 2 years of bear market. One of the major differences of the current cycles relative to the dot.com boom is that then many companies were thriving on expectations of future sales and no earnings, now companies, even start-ups (Palantir did raise to the challenge with a 19% quarter on quarter growth, which reminds me of the now defunct Exodus, the late queen of 40% quarter on quarter revenue growth) do have tangible revenues and earnings, so the market is on a much sounder footing now than then. Furthermore, then the Fed was hiking rates, and had reached the peak by the end of 2000, with the famous out-of-meeting jumbo cut on January 3, 2001, in response to the rapid deterioration of the economy due to the dot.com crash. Were AI to crash, we could probably expect more of the same. Anyway, this time around, i) rates are lower and ii) the Fed is a tailwind, not a headwind.

*  The Federal Reserve was on hold last week, as widely expected, with two dissenters, and kept the rate to 3.50-3.75%. Chairman Powell did say that the US Central Bank was now in a ‘wait and see’ mode. It is widely expected to be on hold throughout the remaining tenure of the current Chair. There are 73.1% chances that the FOMC will cut rates again at the June 17 meeting, the first one without Powell and with Kevin Warsh in his place. President Trump reinstated his preference for low rates, sending the newly appointed Chair a message. If we look at December 2026, at the moment the estimates sees rates at 3.00-3.25%, hence with 2 more cuts during the year. Be cautious of aggressive Fed cuts, as they may signal an impending recession; non-recessionary interest rate cuts are generally welcomed by the equities market. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000), but it is increasingly difficult to get these in the US. You can look forward to these in Europe, even though the European Central Bank might have finished its easing cycle in 2025. 

* Yields on US 10-year Treasuries have reached 4.20%, and were mostly down last week, while European government bond yields were stable. While in 1999 they were even higher, and the Fed was hiking, not easing, we definitely need yields to return below 4% to have a more constructive scenario, albeit gradually and not through a crash. We seem to be getting there, although I cannot yet recommend the US Debt on their public spending plans. Regarding earnings, I remain optimistic, particularly on technology (the main driver for the S&P 500). Ben Snider, who has taken up his post as Chief US Equity Strategist from legend David Kostin, has a bullish forecast of $305 per share for the S&P 500 by the end of the year, with a target price of 7,600.  At the moment, the bottom-up forecasts for 2026 are slightly ahead of his bullish target, with the consensus based around $295. Earnings for 2026 are continuing to rise to a level of $312.63 per share, while for 2027 they are seen at $361.06. In both cases, the earnings’ progression puts both of them on a higher level than just one year ago.

Source: FactSet

* The US GDP closed 3Q25 with a reading of 4.4%, according to the third and final estimate. The Atlanta Fed GDPNow model starts its forecast for 3Q25 in positive territory, with a current forecast of 4.2%, stable from last week, but still a very remarkable level and as usual, ahead of the Blue Chips consensus, which are around 1% and rising slowly. The New York Fed’s Nowcast model has a current forecast of 2.69%, down from 2.69% last week. I believe it is prudent to make an average of those two forecasts to get to the real number; it is particularly good that these are now converging. Introducing a forecast for 4Q25, with earnings expected to climb by 13.0%, compared with a forecast of 8.3% as of December 31st, and with revenues growing by 8.8% vs 7.8% as of December 31st. In 1Q26, earnings are expected to grow by 11.3% vs 12.9% as of December 31st, with revenues growing by 8.7%, vs 8.2% as of December 31st. For 2026, earnings growth is forecasted at 14.1% vs 15% as of December 31st, with revenues coming in at 7.3% vs 7.2% as of December 31st. Introducing a new forecast for 2027, earnings growth is forecasted at 15.8% vs 15.2% as of December 31st, with revenues coming in at 7.5% vs 7.2% as of December 31st. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (January 2027) 16.03%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise, given such a forecast. The current level is not too far from what economists are currently predicting: a 25% chance of a recession in the next 12 months. Goldman Sachs recently lowered its forecast to just 20%. 

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 4Q24 is now under way. Here’s a list of companies reporting this week.

Source: Earnings Whispers

Market Considerations

Source: FactSet, Goldman Sachs Global Investment Research, ISABELNET.com

Source: Bloomberg, ISABELNET.com

Source: FactSet, Goldman Sachs Global Investment Research, ISABELNET.com

Source: Bloomberg Finance L.P., Deutsche Bank, ISABELNET.com

Revenue growth estimates for 2026 are forecasted to grow by 7.5% (7.2% on December 31st), and earnings growth estimates for 2026 are predicted to grow by 14.1% (15.0% on December 31st), so the future looks bright. Introducing forecasts for 2027, which sound again very positive, with revenue to grow by 7.4% (7.3% on December 31st) and earnings to grow by 12.9% (12.3% on December 31st). As mentioned, the Fed has cut its rates by 100bp in 2024, 75bp in 2025, and will continue easing. Apart from the cut from quite high levels, which will probably help make these lofty multiples seem more bearable than offering a real stimulus to the economy, it will be important to see the extent to which central banks are willing to cut rates and their timeframe.  

Four highlights this week. First, we have a chart from Goldman Sachs which focuses on a very important topic: earnings. These have been growing above trend, as we have witnessed together, and this seems to apply to 4Q25 as well, with growth tracking at 11% vs a 7% estimate. So much for capex, set to rule valuations that once were based on earnings. The second chart from Bloomberg talks about the ‘Sell America’ trade, which I would like to remind involves the USD as well as Wall Street. Certainly, the US has underperformed global markets in 2026, as the chart plots. I would argue not to despair, because it has become a pattern that European markets outperform the US in the first half of the year, mostly due to solid earnings (which in the US aren’t lacking), and lower valuations. Usually, America comes back with a vengeance in the second half. It might be more difficult to top Japan, which at present is on a league of its own. The third chart, from Goldman Sachs, and the fourth chart from Deutsche Bank, are two sides of the same story. Goldman Sachs shows that software P/E is at its lowest since 2014, due to the recent fall after the introduction of new features from Anthropic. Buy the dip? Not so fast, says Deutsche Bank: the market has been very selective recently, and prefers investing in clear leaders, with pretty much all others left behind. I guess that the capex story might exacerbate this trend, particularly when companies have to issue debt to finance it. 

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes. The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second. In general, no stock can outperform all the time; some volatility has to be expected. Those who performed better earlier may not perform so well later.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East: this will dominate the news for a while. Any escalation would be negative for the markets.  

I now recommend a long position in equities and a neutral position on US bonds. For EU Bonds, I advise going long (with the notable exception of France), while I still suggest putting together a portfolio that focuses on the safety of German Bunds, which are to be preferred in my view, given increased yields and reduced spreads. Are 60bps more worth swapping an AAA security for a BBB+?  

There are five main headline risks to what is otherwise a constructive view for 2026: i) revenue/earnings not matching forecasts, particularly in technology; ii) any damage to the economy and trade done from Trumponomics, tariffs, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); iv) a negative Fed shock if it does not meet the market’s expectations on easing; and v) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan earlier in November reached an all-time high for the Nikkei 225 after the election of a new political leader for the leading party, the LDP. The choice was between Sanae Takaichi and Shinjiro Koizumi, and the first one prevailed. Takaichi was a protege of the late Shinzo Abe and now champions loose monetary and fiscal policy. The leading index shot up the week after her election, on the perspective that her pro-growth agenda would revive Japan’s economy. Her election, however, doesn’t bode well for the JPY and for JGBs. Remember that Japan, as well as Europe, has a valuation much more compelling (=lower) than that of the US, and could be a useful way to diversify, as UBS was advising not so long ago. I am now very positive on the country, although I would definitely hedge the JPY. The BOJ will, almost certainly, have to raise rates, but if the increase is gradual, in 2026 the strong performance of the Topix could continue. This has received a powerful endorsement from the landslide win of the February 8 elections.

Portfolios

Finally, I want to introduce three portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 25.3% in 2 years, with a Sharpe Ratio of 1.1.

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 23.2% in 2 years, with a Sharpe Ratio of 0.6. Obviously, the devaluation of the USD had a big impact as all stocks are priced in EUR.

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 64.1% in about 1 3/4 years and has outperformed the FTSE MIB Index by 2300+ bp in this timeframe, with a Sharpe Ratio of 1.7.

https://www.wikifolio.com/en/int/w/wf00ipjpeq 

My Japanese Equities Portfolio is up 11.3% in about 3 months.

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply want more information, please contact me at giorgio.vintani@inflectionpoint.blog

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please feel free to drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and I look forward to seeing you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.