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10k Words Equitable Investors February 2026 (2-minute read) Precious metals reacted savagely on the Kevin Warsh Fed Chair nomination. The "AI" capital drain bites for hyperscalers at the same time AI's rapidly improving capabilities bites for technology services. Government bond yields have been rising with low volatility amid broader market gyrations. Those gyrations were most apparent in the worst week since Covid-19 rocked markets in 2020 for Australia's small resources and large IT stocks. Valuation metrics in US tech - and software in particular - have taken a haircut. Regime change is apparent with the majority of stocks outperforming rather than the market being led by a few key stocks - both in the S&P 500 and among Australia's small caps. There is a huge dispersion in valuations among small caps to play with. Finally, US Office CMBS delinquency rate spiked to a record 12.3%! The "Warsh Effect" dents Gold and Silver price performance over past five years 
Source: Equitable Investors, Koyfin "AI" divergence - market punishing MSFT for high capex 
Source: Equitable Investors, Koyfin Capex as % of operating cash flow for "hyperscalers" (MSFT, AMZN, GOOGL, META, ORCL) 
Source: Bank of America Global Research Hyperscaler's combined capital expenditure in US dollars 
Source: Bloomberg India's IT services giants sold off on fears of IT disruption 
Source: Equitable Investors, Koyfin US 10 year bond yield relative to MOVE Index of implied bond market volatility; and Equitable Investors' Bond Market Sentiment indicator 
Source: Yale, Equitable Investors Aus 10 year bond yield relative to realised volatility; and Equitable Investors' Bond Market Sentiment indicator 
Source: RBA, Equitable Investors Largest weekly precentage falls for three S&P/ASX indices 
Source: Iress, Equitable Investors Impact on ASX small caps from factor shocks - implied by historical performance relative to proxy ETFs 
Source: Equitable Investors Recent pull-back in US tech EV/EBITDA multiples 
Source: Koyfin, Equitable Investors US Software sector median EV/Revenue multiple 
Source: Altimeter Surge in % of S&P 500 companies beating the index 
Source: Ned Davis Research via The Kobeissi Letter A regime shift with a surge in the percentage of stocks in the S&P/Small Ordinaries Index that outperformed the market cap weighted average return 
Source: Koyfin, Equitable Investors Dispersion of valuation multiples among US and Australian small caps 
Source: Koyfin, Equitable Investors US Office CMBS delinquency rate spikes to record 12.3% 
Source: Trepp via WOLFSTREET.com Funds operated by this manager: Equitable Investors Dragonfly Fund Disclaimer Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI. |
