Drama In The Stock Market, LFG Daily - February 17, 2026

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Luke Lloyd, CEO Lloyd Financial Group

Colin had some great commentary over the weekend around stock dispersion. I’ll leave it to the investment team for commentary today. I will be hosting “The Cow Guy Close” today on RFDTV from 1:30PM est. to 2:30PM est. Tune in!

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Colin Symons, CIO Lloyd Financial Group

We’ve had quite the exciting start to the year. Despite all the consternation, the S&P 500 is only down -2% from the top and flat on the year. That’s just noise. What’s going on underneath the calm surface, though, is a much more violent rotation as investors fret about what’s likely to hurt or help them, going forward.

One way to see that dispersion is the spread between stocks going up and down. There’s been a popular chart from Nomura on just that, below. The chart may be a little hard to understand, but the thrust of it is that while the S&P 500 has been flat, the average stock has moved 10.8%. That’s a 99th percentile reading, something we only tend to get in major panics like the crashes of 2000 and 2008.

Why would we get such drama in a relatively benign environment? We have plenty of liquidity but late last year investors started to question if AI stocks had grown too fast to justify their valuation, and cyclical stocks started to get attention. Leverage has also been quite high, so high that eventually we ended up with some carry trades crashing as conditions changed, such as the dump in silver.

What does all that really mean for an investor? We’ve seen a lot of chaos, and markets prefer steady over volatile, so we’ve seen a lot of de-risking. In turn, assuming nothing much has changed, de-risking creates opportunity, as forced selling dislocates price.

To add to the drama, we’ve also seen an impressive surge in short selling in old winners, like tech and software. In a lot of ways, it looks like active traders in the market are trying to flip their book, shorting tech and buying cyclicals.

Will that work? Honestly, I don’t think so. What we’ve seen are positioning changes, investors rushing from one side of the boat to the other, more than fundamental change. The tech and AI space is still growing and growing fast. Tech just ran a little too far, too fast.

I think you can make the argument both sides can work, as long as growth and liquidity remain supportive. I’d note, however, that one side has already seen much more support lately than the other side. Industrials (XLI) went well into overbought territory a few weeks ago, while something like software (IGV) was deeply oversold.

Ultimately, selling tech and buying value already worked well but I’m unwilling to say that continues, as it’s more about positioning changes than anything really fundamental. Now, we’ve re-rated value higher and de-rated tech lower. While we’ve been trying to own both sides of that, I’m currently far more comfortable buying the tech side over the value side until something really breaks or shifts.

CPI was better than expected, at 0.2% m/m vs. exp. 0.3%, with Core at 0.3% m/m, as expected. That took odds of a third rate cut this year up to 50%. I have to admit, I didn’t understand the fears, here. Everything I saw was pointing to a dovish lean.

SuperCore CPI did rise 0.6% m/m but the Y/Y remains at it’s lowest since 2021 as last January data also had a big spike.

Since it’s hitting the news, I’ll mention the next chance for a Supreme Court tariff decision is 2/20.

Japanese GDP was 0.1% q/q vs. exp. 0.4%. That helped lift JGBs, where we saw a strong 5Y auction. That’s despite the finance ministry expecting a surge in issuance.

Datacenters now account for 7% of US energy demand.

Gold and silver are both down about -2%, with silver nearing recent lows.

ADP Employment, and Empire State Manufacturing, today.

What does it all mean? AI fear is keeping volatility elevated to start the day but how we end is more important.

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