The first data of the year begins to confirm the impact of monetary and fiscal stimulus accumulated in Q4 2025. In particular, the January ISM Manufacturing survey delivered a positive surprise by returning to expansion territory with a reading of 52.6, breaking a streak of 10 consecutive months of contraction.
The rebound is supported by solid fundamentals such as:
New orders surged to 57.1 (an increase of around 10 points).
Production also posted a strong recovery.
Delivery times lengthened, consistent with stronger demand traction.
The “new orders – inventories” spread, a leading indicator of activity, accelerated after a flat 2025.
The employment subcomponent surprised to the upside, although it remains in contraction (48.1). This reinforces the perception of labor market stabilization, in line with recent jobless claims data. However, the figure does not yet confirm a sustained turnaround in manufacturing employment and therefore does not justify a hawkish shift from the Fed.
Labor Market in Progressive Normalization
The December JOLTs report, delayed due to the partial government shutdown, points to stability with nuances of weakness. Job openings declined, although voluntary quits edged up slightly (from 3.19 to 3.2 million), while layoffs did not worsen. The labor market remains in a post-pandemic normalization phase, with structurally lower demand in light of productivity gains.
Inflation: Mixed Signals and Need for Monitoring
However, a sharp shift in the growth outlook or a negative ruling by the Supreme Court regarding the use of tariffs could put pressure on yields and affect risk assets through:
Increased rate volatility
Less room for Fed rate cuts
Repricing of valuations
For this reason, we maintain a neutral view on equities, awaiting the right moment to increase positions.
Severe Correction in Software Within the Tech Sector
The week was also marked by a sharp correction in the technology sector, particularly in software. Despite the structural strength of the AI investment cycle, software companies experienced a capitulation session on Tuesday, with market capitalization losses exceeding $300 billion.
The decline was triggered by:
New functionalities announced by Anthropic CoWork
Comparisons to the impact of DeepSeek in 2025
Fears of disruption to SaaS models and per-user licensing
Initial drops concentrated in firms such as RELX, S&P Global, Thomson Reuters, and Legalzoom.com, later spreading across the sector and to private equity firms with significant exposure
However, the mass selloff appears to be driven more by panic than objective analysis. Disruption risk is real, but many stocks are already trading at decade-low multiples after a roughly 40% valuation compression. At these levels, much of the potential impact appears to be already priced in.
AI and CapEx: The Cycle Continues
Our view that 2026 will not be the year the AI bubble bursts is further reinforced. Hyperscalers are not only continuing to expand their computational capacity but are also significantly revising their investment plans upward. Alphabet now targets $180 billion, up from the previously expected $116 billion, while Amazon raises its estimate to $200 billion from the previous $150 billion. Altogether, AI investment could exceed $700 billion in 2026.
Toward a Less Concentrated Market
With more dynamic economic growth, the door opens to a more balanced market, where returns are no longer so heavily concentrated in technology and communications. The growing divergence in performance, and valuation, between winners and losers within the AI universe points to increased market selectivity.
The recent decline in software may have been the first step toward a broader rotation: from defensive growth to cyclicals, and from thematic concentration to structural diversification.
In conclusion, the ISM data signals the beginning of a new phase in the economic cycle, with manufacturing emerging from contraction and AI investment far from exhausted. However, concerns around inflationary pressure could resurface, requiring tactical caution and balanced portfolio construction. The key for 2026 will be clearly distinguishing between real opportunities and speculative noise surrounding disruptive technology.
