The market’s results once again understate the volatility we endured last week—and we don’t expect calmer waters anytime soon. That’s precisely why discipline matters: staying diligent, systematic, and anchored in the data rather than the day’s headlines. Sowell’s TAP gauges remain composed and fully invested.
Last week was the financial equivalent of a Super Bowl that featured three quarters of absolute defensive dominance followed by a final two minutes of offensive fireworks. If you just looked at the final scoreboard, you’d think it was a standard, hard-fought game. But the game tape tells a much more volatile story.
Between a crypto collapse, a massive software shakeout, and a labor market that looks like it’s nursing a torn ACL, last week was a masterclass in how volatility can disguise the true health of the market.
A "Hail Mary" Finish
By Thursday afternoon, the markets were effectively pinned deep in their own territory. But a Friday surge—led by the Dow crossing a historic milestone—dragged the averages back from the brink of a blowout.
The S&P 500 finished down a modest 0.09%, masking a massive 2% swing on Friday. The Nasdaq Composite ended down 1.8%, with tech names taking repeated hits before a late recovery.
The MVP: The S&P 500 Equal Weighted Index stole the headlines, gaining +2.15% for the week—evidence that Industrials, Consumer Staples, Energy, and Basic Materials decisively outpaced Technology and Communication Services.
Play-by-Play: Big Tech’s Expensive Playbook
The primary catalyst this week was Big Tech earnings season, and the play-call was expensive. Alphabet and Amazon stepped up to the line of scrimmage and announced they aren’t just playing for the playoffs—they’re rebuilding the entire stadium.
The Capex Blitz: Alphabet raised its capital expenditure budget to $175–185B (well above the $115B estimate), while Amazon forecast roughly $200B.
Strategy: Nearly $400B is now earmarked for AI infrastructure. While executives signaled confidence in long-term demand, investors reacted like a GM facing a massive salary-cap hit—panic over near-term margins followed.
Software Fumble: Fears that AI could disrupt—or replace—large portions of the software industry triggered heavy selling. It’s a familiar cycle: transformative technology brings overinvestment and short-term pain before long-term gains emerge.
The Special Teams Disaster: Bitcoin’s Bad Week
Bitcoin, which was comfortably in the red zone near $83,000 last Friday, took a devastating hit. Treasury Secretary Scott Bessent made clear that the federal government has no intention of bailing out Bitcoin or the banks holding it.
This “no-bailout” stance acted like a sudden change in field conditions, sending Bitcoin plunging toward $62,000 as the risk-on crowd scrambled for the exits.
The Scouting Report: Economic Red Flags
The referees—the economic data—threw plenty of flags this week, suggesting the economy may be losing momentum:
ADP Employment
Only +22k jobs (expected 45k)
A weak running game; no forward progress.
JOLTs (Job Openings)
Dropped to 6.54M (lowest since 2020)
Fewer roster spots available for new players.
Challenger Layoffs
103,435 cuts in January (highest since 2009)
The “Great Cut Day” before the season starts.
Jobless Benefits
Jumped to 231K (two-month high)
More players heading to injured reserve.
While the labor market looks winded, Manufacturing PMI (52.4) and ISM Non-Manufacturing (53.8) suggest production and services remain resilient. The economy appears bifurcated—productive players on the field, but a growing crowd on the sidelines waiting for opportunities.
Post-Game Analysis: Volatility as a Smoke Screen
Volatility disguised the market’s true story last week. A quick glance shows the S&P 500 down just 0.1%, suggesting calm conditions. In reality, pressure in Tech and Crypto was offset by a sharp rotation into blue-chip stocks, pushing the Dow toward 50,000.
Looking ahead, attention shifts to non-tech earnings and the upcoming CPI inflation report. With unemployment data finally expected after the brief government shutdown, markets are bracing for clues ahead of the March 17 FOMC meeting.
With a new Fed Chair in place, investors are trying to decode the new head coach’s playbook. Will weakening labor data prompt rate cuts—a prevent defense—or will stubborn inflation force policymakers to keep the pressure on?
“One way to think about the scale is what we are all investing in capital to build out the infrastructure that’s needed for artificial intelligence. You know maybe four years ago Google was spending less than $30 billion per year. This year that number is going to be over $90 billion. And if you collectively add what all the companies are doing, you know we have well over a trillion dollars of investment going in building the infrastructure for this moment.”
— Google CEO Sundar Pichai, BBC Interview, Nov 19, 2025
Affordability: The Crisis that Isn’t
By Gregory Lai
The debate over public policy has become focused on producing remedies for a problem that does not exist. The issue has been framed as a “crisis” of affordability. Assertions by political operatives drive the debate toward the need for economic policies that make goods and services more affordable for an American public whose purchasing power has diminished over time. The cost of housing is at the center of this debate. The facts run counter to the arguments favored by those who would have the government “do something”. This sort of debate, about a problem that does not exist and the need for more government intervention into the market to remedy the crisis, is not uncommon in the history of American politics.
In the early 1970’s, there was a perceived oil shortage, a crisis that was met with a set of energy policies, the most unfortunate of which were price controls and the establishment of the Department of Energy (DOE). The imposition of price controls and regulatory limits on oil exploration was followed by a catastrophic increase in oil prices, which, adjusted for inflation, rose by more than 600% from mid-1973 through the end of 1980. In 1981, President Reagan decontrolled oil prices, and prices fell by around 60%. However, the damage to market-clearing mechanisms remained. The DOE, established in 1977, continued to try to manage the oil and other energy markets. With the DOE in place, the price of a barrel of oil, adjusted for inflation, rose by roughly 700% from July 1986 to June 2008. More recently, the inflation-adjusted price of oil has fallen by about 70% from its 2008 high as supplies have expanded.
In the 1970’s, there was an earlier version of the “housing affordability crisis”. In 1977, in response to the crisis, Congress passed the Community Reinvestment Act (CRA). The thrust of the CRA was to force banks to extend mortgages to borrowers who could not repay them. The argument for the CRA was based on the belief that some segments of the communities in which banks operated lacked adequate access to mortgages for various reasons. The framing of the CRA was puzzling because the sponsors argued the loans would be both prudent and profitable, but their argument raised the question: if this were true, why must the banks be forced to make these subprime mortgages? There are economists like Thomas Sowell who argued in his book The Housing Boom and Bust that house prices reflected overly burdensome land-use restrictions, which, in turn, restricted the supply of housing. The National Association of Home Builders estimates that Government regulations add 25% to the price of a new home, roughly $93,000, and delay the additions to the supply of new homes. The proper response to the crisis would have been to reduce regulations, not to layer more on the housing market. As credit markets realized that a significant share of subprime mortgages would not be repaid, financial markets descended into chaos. Government land-use policies and the CRA were the foundation for the Great Market Crash of 2008 and the so-called “Great Recession”.
The current housing affordability “crisis” has all the requirements for yet another calamity precipitated by government intervention in the market. Claims abound that, for various reasons, houses have become unaffordable for most Americans. These are startling claims considering certain observable conditions. For example, according to the U.S. Census Bureau, 65.2% of households owned their homes in the third quarter of 2025. In the third quarter of 1980, 65.6% of households owned their homes. Is a 0.4% differential really evidence that housing is unaffordable? Over the last 45 years, the percentage of households that own their homes peaked at 69.2% in 2004 and bottomed out at 63.1% in 2016. The homeownership rate peaked while the CRA was requiring banks to make unsound loans. Over the entire forty-five-year period, home ownership fell in a range from about 64.0% to 66.0% for the most part. These data do not support the claim that homes are currently unaffordable.
The National Association of Realtors Home Affordability Index stood at 106 at its last reading. An index above 100 indicates that a family earning the median income can readily afford the median-priced home. Recent data show that the number of existing homes sold fell from November 2024 to June 2025, after which sales began to drift upward. The most recent sales data show existing home sales are running at an annual rate of 4.1 million on a seasonally adjusted basis. Consistent with the recent decline in demand, the median home price has been declining since 2021. While demand has slowed, many people can afford to buy a home, or the number of homes sold would be much lower.
The housing market appears to be behaving as expected, despite the unfortunate government interference. Homes are no more or less affordable than they have been for the last forty-five years. The proper policy response is to allow market mechanisms to work, rather than trying to end a “crisis” that does
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.
WEEK AHEAD
February 9-13, 2026
The market’s results once again understate the volatility we endured last week—and we don’t expect calmer waters anytime soon. That’s precisely why discipline matters: staying diligent, systematic, and anchored in the data rather than the day’s headlines. Sowell’s TAP gauges remain composed and fully invested.
Pace Yourself, Pressure
Last week was the financial equivalent of a Super Bowl that featured three quarters of absolute defensive dominance followed by a final two minutes of offensive fireworks. If you just looked at the final scoreboard, you’d think it was a standard, hard-fought game. But the game tape tells a much more volatile story.
Between a crypto collapse, a massive software shakeout, and a labor market that looks like it’s nursing a torn ACL, last week was a masterclass in how volatility can disguise the true health of the market.
A "Hail Mary" Finish
By Thursday afternoon, the markets were effectively pinned deep in their own territory. But a Friday surge—led by the Dow crossing a historic milestone—dragged the averages back from the brink of a blowout.
The S&P 500 finished down a modest 0.09%, masking a massive 2% swing on Friday. The Nasdaq Composite ended down 1.8%, with tech names taking repeated hits before a late recovery.
The MVP: The S&P 500 Equal Weighted Index stole the headlines, gaining +2.15% for the week—evidence that Industrials, Consumer Staples, Energy, and Basic Materials decisively outpaced Technology and Communication Services.
Play-by-Play: Big Tech’s Expensive Playbook
The primary catalyst this week was Big Tech earnings season, and the play-call was expensive. Alphabet and Amazon stepped up to the line of scrimmage and announced they aren’t just playing for the playoffs—they’re rebuilding the entire stadium.
The Special Teams Disaster: Bitcoin’s Bad Week
Bitcoin, which was comfortably in the red zone near $83,000 last Friday, took a devastating hit. Treasury Secretary Scott Bessent made clear that the federal government has no intention of bailing out Bitcoin or the banks holding it.
This “no-bailout” stance acted like a sudden change in field conditions, sending Bitcoin plunging toward $62,000 as the risk-on crowd scrambled for the exits.
The Scouting Report: Economic Red Flags
The referees—the economic data—threw plenty of flags this week, suggesting the economy may be losing momentum:
While the labor market looks winded, Manufacturing PMI (52.4) and ISM Non-Manufacturing (53.8) suggest production and services remain resilient. The economy appears bifurcated—productive players on the field, but a growing crowd on the sidelines waiting for opportunities.
Post-Game Analysis: Volatility as a Smoke Screen
Volatility disguised the market’s true story last week. A quick glance shows the S&P 500 down just 0.1%, suggesting calm conditions. In reality, pressure in Tech and Crypto was offset by a sharp rotation into blue-chip stocks, pushing the Dow toward 50,000.
Looking ahead, attention shifts to non-tech earnings and the upcoming CPI inflation report. With unemployment data finally expected after the brief government shutdown, markets are bracing for clues ahead of the March 17 FOMC meeting.
With a new Fed Chair in place, investors are trying to decode the new head coach’s playbook. Will weakening labor data prompt rate cuts—a prevent defense—or will stubborn inflation force policymakers to keep the pressure on?
Affordability: The Crisis that Isn’t
By Gregory Lai
The debate over public policy has become focused on producing remedies for a problem that does not exist. The issue has been framed as a “crisis” of affordability. Assertions by political operatives drive the debate toward the need for economic policies that make goods and services more affordable for an American public whose purchasing power has diminished over time. The cost of housing is at the center of this debate. The facts run counter to the arguments favored by those who would have the government “do something”. This sort of debate, about a problem that does not exist and the need for more government intervention into the market to remedy the crisis, is not uncommon in the history of American politics.
In the early 1970’s, there was a perceived oil shortage, a crisis that was met with a set of energy policies, the most unfortunate of which were price controls and the establishment of the Department of Energy (DOE). The imposition of price controls and regulatory limits on oil exploration was followed by a catastrophic increase in oil prices, which, adjusted for inflation, rose by more than 600% from mid-1973 through the end of 1980. In 1981, President Reagan decontrolled oil prices, and prices fell by around 60%. However, the damage to market-clearing mechanisms remained. The DOE, established in 1977, continued to try to manage the oil and other energy markets. With the DOE in place, the price of a barrel of oil, adjusted for inflation, rose by roughly 700% from July 1986 to June 2008. More recently, the inflation-adjusted price of oil has fallen by about 70% from its 2008 high as supplies have expanded.
In the 1970’s, there was an earlier version of the “housing affordability crisis”. In 1977, in response to the crisis, Congress passed the Community Reinvestment Act (CRA). The thrust of the CRA was to force banks to extend mortgages to borrowers who could not repay them. The argument for the CRA was based on the belief that some segments of the communities in which banks operated lacked adequate access to mortgages for various reasons. The framing of the CRA was puzzling because the sponsors argued the loans would be both prudent and profitable, but their argument raised the question: if this were true, why must the banks be forced to make these subprime mortgages? There are economists like Thomas Sowell who argued in his book The Housing Boom and Bust that house prices reflected overly burdensome land-use restrictions, which, in turn, restricted the supply of housing. The National Association of Home Builders estimates that Government regulations add 25% to the price of a new home, roughly $93,000, and delay the additions to the supply of new homes. The proper response to the crisis would have been to reduce regulations, not to layer more on the housing market. As credit markets realized that a significant share of subprime mortgages would not be repaid, financial markets descended into chaos. Government land-use policies and the CRA were the foundation for the Great Market Crash of 2008 and the so-called “Great Recession”.
The current housing affordability “crisis” has all the requirements for yet another calamity precipitated by government intervention in the market. Claims abound that, for various reasons, houses have become unaffordable for most Americans. These are startling claims considering certain observable conditions. For example, according to the U.S. Census Bureau, 65.2% of households owned their homes in the third quarter of 2025. In the third quarter of 1980, 65.6% of households owned their homes. Is a 0.4% differential really evidence that housing is unaffordable? Over the last 45 years, the percentage of households that own their homes peaked at 69.2% in 2004 and bottomed out at 63.1% in 2016. The homeownership rate peaked while the CRA was requiring banks to make unsound loans. Over the entire forty-five-year period, home ownership fell in a range from about 64.0% to 66.0% for the most part. These data do not support the claim that homes are currently unaffordable.
The National Association of Realtors Home Affordability Index stood at 106 at its last reading. An index above 100 indicates that a family earning the median income can readily afford the median-priced home. Recent data show that the number of existing homes sold fell from November 2024 to June 2025, after which sales began to drift upward. The most recent sales data show existing home sales are running at an annual rate of 4.1 million on a seasonally adjusted basis. Consistent with the recent decline in demand, the median home price has been declining since 2021. While demand has slowed, many people can afford to buy a home, or the number of homes sold would be much lower.
The housing market appears to be behaving as expected, despite the unfortunate government interference. Homes are no more or less affordable than they have been for the last forty-five years. The proper policy response is to allow market mechanisms to work, rather than trying to end a “crisis” that does
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.