The Signal - Weekend Edition- Sunday, February 15, 2026

The S&P 500 gave back about 1.5% this week, and the story was less about what went wrong and more about what didn't go right.

January CPI came in at 2.4% year-over-year -- below the 2.5% forecast, with core at 2.5%. In a normal world, that's a green light. Inflation cooling, Fed rate cuts still on the table, economy intact. But this isn't a normal world. The market shrugged off the good news because it was too busy worrying about whether Big Tech's AI spending is sustainable.

Nvidia fell 2.2%. Apple dropped 2.3%. Meta slid 1.6%. Broadcom lost 1.8%. The megacap names that carried the market for two years were the ones dragging it down. Meanwhile, software names like Salesforce and Oracle both gained 2.3%, and Applied Materials surged 8% on strong earnings and a semiconductor revenue guidance beat north of 20%.

The 10-year Treasury yield dropped to 4.05% by Friday -- down from 4.17% earlier in the week -- as the CPI print pulled rate cut odds higher. Markets are now pricing 83% odds of a June cut. Gold pulled back from highs around $5,066 to $5,042 per ounce on profit-taking. WTI crude drifted to roughly $63.50, down from $65.74 the prior week. Bitcoin hovered below $70,000 -- Morningstar's Claude Erb pegged fair value closer to $55,000 using a Metcalfe's law model, which tells you something about where sentiment is vs. fundamentals.

The Dow closed at 49,503. S&P at 6,836. Nasdaq ended the week flat to slightly lower. Russell 2000 quietly outperformed, continuing its January momentum (+5.3% in Jan).

The THOR Risk Gauge reflects current fund positioning across managed assets. Current score: 7 (Bullish) -- both funds are heavily invested in equities but with a defensive tilt. Nasdaq and tech are OFF, which tempers the score despite high overall equity exposure. The system is saying: stay in the game, but don't chase the names that got you here.

Here's what's interesting about this week. Inflation came in better than expected. The economy is growing. Earnings are beating estimates -- FactSet has CY 2026 S&P earnings growth at 14.4%. And yet the market couldn't get out of its own way.

Why? Because the narrative has shifted. For two years it was "AI will change everything." Now it's "…but what does it cost?" The hyperscalers -- Amazon, Alphabet, Microsoft, Meta, Oracle -- are set to spend $600-650 billion on AI infrastructure in 2026. That's a 36% increase from 2025. Amazon alone is projecting $200 billion in capex, which exceeds what the entire U.S. energy sector invests annually. Even Alphabet CEO Sundar Pichai admitted there are "elements of irrationality" in the pace. Meanwhile, analysts warn free cash flow could drop up to 90% as spending outpaces AI revenue growth.

That's not a prediction of a crash. It's the data telling you that concentration risk in megacap tech is real and growing.

This is exactly why the system moved both funds away from heavy Nasdaq and Tech exposure months ago. THOR SDQ Index Rotation is running 50/50 Dow and S&P -- broad market exposure without the Nasdaq's 60% tech concentration. THOR Low Volatility Index has 7 of 10 sectors risk-on but Tech is OFF. When Nvidia drops 2.2% and Applied Materials rallies 8% in the same week, that's a market telling you the opportunity set is rotating underneath the headlines.

The S&P 500 forward P/E sits at 21.5x. At that valuation with 14.4% earnings growth baked in, there's not much room for disappointment at the top of the cap table. But beneath the surface, small-caps are trading at a 13% discount to fair value according to Morningstar. Growth stocks are 12% undervalued. The breadth is there -- it's just not where everyone's looking.

Our positioning reflects that. Heavily invested. Defensive tilt. Avoiding the crowded trade. The system doesn't get emotional about AI capex headlines -- it reads price data and positions accordingly.

No signal changes this week. Both funds held steady:

Worth noting: the system already had Tech turned off in both funds before this week's megacap selloff. That's not prediction -- it's the data catching deterioration that headlines hadn't priced in yet. This is what we mean when we say we detect regime changes, not predict them.

The system continues to favor broad market exposure through Dow and S&P while avoiding the Nasdaq's tech concentration. With megacaps under pressure this week, this positioning has been the right call.

Seven sectors risk-on with equal weighting across the real economy -- Materials, Energy, Industrials, Staples, Consumer Discretionary, Healthcare, and Utilities. That's a portfolio that says "the economy is fine, but the market's darlings are not." When the S&P 500 is 35% tech and your system says to own 0% tech… that's a massive active bet that's been working.

Big week. Markets are closed Monday for Presidents' Day, but the data doesn't stop.

Tuesday, Feb 17: - Housing Starts (consensus: +1.9% MoM) -- housing has been soft, this is the pulse check - Industrial Production (consensus: +0.5%) -- manufacturing momentum matters for the "broadening" narrative - FOMC Minutes (7 PM ET) -- the main event. Markets will parse every word for rate cut timing signals after January's softer CPI

Wednesday, Feb 18: - Wholesale Inventories - API Crude Oil inventories (last week's 13.4M barrel build was enormous)

Thursday, Feb 19: - Pending Home Sales (consensus: +6.5% rebound from -9.3% prior)

Friday, Feb 20: - PCE Price Index -- the Fed's preferred inflation gauge. If this confirms what CPI already told us, June rate cut odds climb higher - Flash PMIs (composite, manufacturing, services) -- real-time growth signal - Fed's Bostic speaks

The FOMC Minutes and Friday's PCE are the marquee events. Everything else is supporting cast. Watch the 10-year yield -- if it breaks below 4.00% on dovish minutes, that changes the rate environment meaningfully.

🎙️ Behind the Ticker: Bob Elliott -- Unlimited Funds The latest episode features Bob Elliott, co-founder and CIO of Unlimited, who spent the bulk of his career at Bridgewater before launching his own shop. Bob is bringing Vanguard-style indexing to the hedge fund world -- replicating hedge fund strategies at a fraction of the cost through liquid ETFs. We get into how their third-generation Bayesian machine learning replication actually works, why the traditional 60/40 should become 50/30/20, and the realities of growing a boutique ETF business on a guerrilla marketing budget. One of the more honest conversations about what it takes to build an ETF company from scratch. - Listen on Spotify - Watch on YouTube

📊 Morningstar: "Where We See Investing Opportunities -- February 2026" Morningstar pegs the US market at a 5% discount to fair values, with small-caps at 13% undervalued and growth stocks at 12%. They also flagged the biggest fair value increases: Tesla (+33%), TSMC (+38%), and Lam Research (+74%). The takeaway: the opportunity set is broadening beyond megacap, which aligns exactly with where our system is positioned. Read it here

💰 Goldman Sachs: "Why AI Companies May Invest More Than $500B in 2026" Goldman walks through the hyperscaler capex arms race -- $600B+ projected for 2026, 75% going to AI infrastructure. The key chart: spending is consistently blowing past analyst estimates (2025 forecasts rose 44.6% from initial $280B to $405B+). They argue it could hit $700B before constraints kick in. Whether you're bullish or bearish on AI, understanding the scale of this capital deployment is essential. Goldman's analysis

📈 FactSet Earnings Insight -- February 13, 2026 The weekly earnings scorecard. S&P 500 forward P/E at 21.5x, CY 2026 earnings growth projected at 14.4%. The numbers behind the valuation debate. Full report

📚 Kitces Weekend Reading for Financial Planners (Feb 14-15) Michael Kitces' curated roundup for advisors -- this week covers RIA compensation structures (why incentive comp drives growth), SALT tax strategies, and RMD timing optimization. If you're an advisor, this is always worth 15 minutes. Kitces roundup

📖 Brad's Book: "Little Reasons, Big Consequences" If you haven't picked it up yet -- the thesis is simple: investors underperform because of behavior, not bad strategies. Small, reasonable decisions made at the wrong time compound into massive return drag. It's a quick read and it'll change how you think about your own portfolio. Get it on Amazon

The Signal is published weekdays + Sundays by THOR Funds. Current positioning reflects live ETF holdings as of the most recent rebalance. This is not investment advice -- it's what the data is showing. Past performance doesn't guarantee future results.