Green Book February 2026
Small Caps Sizzle
A small-cap bounce in January is arguably the best-known of all stock market anomalies, but for much of the last decade it’s been a flop. This year, it was firing on all cylinders until the last few days of January, when the Russell 2000 surrendered about half of its gain. Nonetheless, it was the index’s best January since 2023.
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Featured Articles
New Year, New Styles
Annual style rebalancing triggered a sizable trim to IT exposure in the S&P 500 Value Index, but it is still the largest weight, followed closely by Financials. Revisions in the S&P 500 Growth Index caused its top-heavy concentration to become even more pronounced: Tech and Comm Services comprise 65% of the total weight. If counting the Mag 7 from Discretionary, tech titans make up 71% of the index.
Trump’s Second First Year—Same Showmanship, Different Stage
The commencement of Trump’s two terms were separated by eight years, a global pandemic, trillions in stimulus, and the quiet burial of several macroeconomic and civic assumptions once thought indestructible. While the personalities and rhetoric remain familiar, the economic backdrop, policy constraints, and market sensitivities of 2025 bore little resemblance to those of 2017.
JGB Jitters, Nikkei Nirvana
In January, a surge in Japanese Government Bond yields occurred simultaneously with a selloff in the Yen—a sign of intensifying market concern about fiscal stability. Interestingly, collective stress in both the JGB and Yen has yet to spill over into the Nikkei Index, but if history is any guide, it is doubtful that Japanese equities will continue to be immune.
Small Caps Sizzle
A small-cap bounce in January is arguably the best-known of all stock market anomalies, but for much of the last decade it’s been a flop. This year, it was back in full force... until it faded. Despite giving back some of its sizzle in late January, the Russell 2000 ended the month with a 4% advantage over the S&P 500—its best January since 2023.
Active/Passive Update Q4-2025
Financial markets mimicked Mother Nature in the fourth quarter, drifting into a kind of hibernation. Style returns were rangebound around zero, and the spread between returns was about as narrow as we can recall. Active portfolio performance shows there wasn’t much to pick from to add significant value.
A “New-New” Era In Valuations?
With structural economic and market changes, and influences of ever-evolving tech advances, years ago we introduced our “New-Era” median valuation metrics (1995-present). For the last decade, we’ve drifted further away from those “New-Era” benchmarks, which compelled us to take a look at today’s stock valuations compared to “New-New” Era median levels based on data from 2018-forward.
Table of Contents
Stock Market
- JGB Jitters, Nikkei Nirvana
- New Year, New Styles
- A “New-New” Era In Valuations?
- Transports Giving The Green Light?
Of Special Interest
Macro Monitor
- Trump’s Second First Year—Same Showmanship, Different Stage
- Risk Aversion Index: A New “Lower-Risk” Signal
The Leuthold Refresh
Equity Strategies
Market Internals
- Excellent Start To Q4 Reporting
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
New Year, New Styles
Annual style rebalancing triggered a sizable trim to IT exposure in the S&P 500 Value Index, but it is still the largest weight, followed closely by Financials. Revisions in the S&P 500 Growth Index caused its top-heavy concentration to become even more pronounced: Tech and Comm Services comprise 65% of the total weight. If counting the Mag 7 from Discretionary, tech titans make up 71% of the index.
Trump’s Second First Year—Same Showmanship, Different Stage
The commencement of Trump’s two terms were separated by eight years, a global pandemic, trillions in stimulus, and the quiet burial of several macroeconomic and civic assumptions once thought indestructible. While the personalities and rhetoric remain familiar, the economic backdrop, policy constraints, and market sensitivities of 2025 bore little resemblance to those of 2017.
JGB Jitters, Nikkei Nirvana
In January, a surge in Japanese Government Bond yields occurred simultaneously with a selloff in the Yen—a sign of intensifying market concern about fiscal stability. Interestingly, collective stress in both the JGB and Yen has yet to spill over into the Nikkei Index, but if history is any guide, it is doubtful that Japanese equities will continue to be immune.
Small Caps Sizzle
A small-cap bounce in January is arguably the best-known of all stock market anomalies, but for much of the last decade it’s been a flop. This year, it was back in full force... until it faded. Despite giving back some of its sizzle in late January, the Russell 2000 ended the month with a 4% advantage over the S&P 500—its best January since 2023.
Active/Passive Update Q4-2025
Financial markets mimicked Mother Nature in the fourth quarter, drifting into a kind of hibernation. Style returns were rangebound around zero, and the spread between returns was about as narrow as we can recall. Active portfolio performance shows there wasn’t much to pick from to add significant value.
A “New-New” Era In Valuations?
With structural economic and market changes, and influences of ever-evolving tech advances, years ago we introduced our “New-Era” median valuation metrics (1995-present). For the last decade, we’ve drifted further away from those “New-Era” benchmarks, which compelled us to take a look at today’s stock valuations compared to “New-New” Era median levels based on data from 2018-forward.
Stock Market
- JGB Jitters, Nikkei Nirvana
- New Year, New Styles
- A “New-New” Era In Valuations?
- Transports Giving The Green Light?
Of Special Interest
Macro Monitor
- Trump’s Second First Year—Same Showmanship, Different Stage
- Risk Aversion Index: A New “Lower-Risk” Signal
The Leuthold Refresh
Equity Strategies
Market Internals
- Excellent Start To Q4 Reporting
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
Perception for the Professional
March 2026 Issue
Featured Articles
Sector Navigator
March 2026 Issue
