Credit Spread Seasonality – An Auspicious Sign for Corporate Bonds? | ETF TrendsWhile the equity market has its wellknown "January Effect,†credit markets also show a seasonal pattern. Looking back over nearly three decades of data, January tends to be one of the better months for corporate bond spreads. The question is whether this earlyyear strength typically carries through to the rest of the calendar year, and what it might mean for 2026.This trend is especially pronounced in investmentgrade corporates. ...

Market Performance - U.S. equity markets reached all-time closing highs on February 18th, 2026, driven by a strong "risk-on" appetite and a resurgence in the technology sector [1] - The S&P 500 climbed 0.58% to a record 6,891.40, while the Nasdaq Composite rose 0.79% to close at 24,916.90, indicating bullish sentiment towards large-cap growth stocks [2] - The Dow Jones Industrial Average added 138 points, or 0.28%, ending at 49,707.00, marking its own record [2] - The Russell 2000 index of smaller companies saw a modest uptick of 0.5%, suggesting a positive market breadth [3] Earnings Highlights - Kinross Gold reported adjusted earnings of $0.75 per share, exceeding the consensus estimate of $0.55, with revenue driven by a 40% year-over-year increase in realized gold prices [4] - Medtronic's stock rose after a 4.6% increase in quarterly earnings, surpassing analyst forecasts for the fourth consecutive quarter [5] - Entergy's profits exceeded Wall Street expectations, leading to a rally of over 6% in its stock [6] Technology Sector Insights - Nvidia shares rose 1.2% ahead of its earnings report on February 25th, with analysts focused on updates regarding its next-generation AI chips [7] - Other major tech companies showed mixed results, with Apple and Microsoft posting modest gains, while Google and Meta Platforms experienced slight pullbacks [7] - Tesla gained 1.5% amid reports of expanded manufacturing capacity in international markets [7] Economic Outlook - The market is awaiting the release of the latest Federal Reserve meeting minutes, which may provide insights into the central bank's interest rate path for the remainder of 2026 [8] - Upcoming earnings from Baidu and Vulcan Materials are expected to shed light on global tech demand and domestic infrastructure spending [9] - The focus remains on whether corporate earnings can continue to justify elevated valuations in an environment of persistent 3% inflation [9]

Industry Overview - Small-cap and penny stocks are experiencing a notable rally, with the Russell 2000 index up by over 5%, significantly outperforming the S&P 500, which is up by only 1.7% [1] - The rally is driven by expectations of market-beating results from these companies, which are trading at discounted valuations [1][2] - The Federal Reserve's anticipated monetary policy easing is further supporting the case for investing in penny and small-cap stocks [2] January Effect - The January effect is benefiting small-cap companies as investors are buying smaller stocks, particularly those that faced tax-loss selling in the previous quarter [3] - The Russell 2000 index has shown strong performance in January, suggesting potential continued strength into February [3] Fundamentals and Valuations - Fundamentals for small-cap companies are improving, with their 1-year price-to-earnings multiples being 30% lower than those of large-cap companies [4] - Small caps have shown earnings growth that slightly exceeded larger companies for the first time in thirteen quarters [4] Seasonal Trends - Historically, small caps perform better in midterm election years, averaging a 1.3% advance in February compared to the S&P 500's average of 0.3% [5] - Current seasonal patterns indicate a hawkish bias towards interest rates, favoring small-cap stocks [5] Investment Opportunities - The S&P SmallCap 600 index is already up by more than 5% for the year, indicating a favorable environment for investing in penny stocks trading under $5 [6] - A list of 14 NYSE penny stocks has been compiled based on popularity among hedge funds and potential upside of over 30% [8][9] Company Highlights - **Nouveau Monde Graphite Inc. (NYSE:NMG)**: Current share price is $2.09 with an upside potential of 107.33%. The company has a net asset value of $919 million or $3.51 per share, factoring in a cash balance of $68.8 million and debt of $11.6 million [11][12]. It has signed a 7-year off-take agreement with the Canadian government for 30,000 tons per annum of graphite concentrate [13][14]. - **Auna SA (NYSE:AUNA)**: Current share price is $4.76 with an upside potential of 53.36%. Analysts expect significant growth due to a $500 million expansion in Mexico and a strategic partnership with Sojitz [15][16][17]. The company operates a vertically integrated network of healthcare facilities in Latin America, focusing on high-complexity care [18].

Core Viewpoint - The article discusses the phenomenon known as the "January Effect," highlighting that despite severe winter weather, stock markets are performing well during this critical period for investors [1]. Group 1: Market Conditions - The U.S. is experiencing extreme winter weather, including Winter Storm Fern, which is causing significant disruptions [1]. - The article notes that this time of year is crucial for stock market performance, suggesting that investors are closely monitoring market trends [1]. Group 2: Investor Sentiment - Investors are optimistic about stock performance despite the harsh weather conditions, indicating a strong market sentiment [1]. - The article implies that the January Effect may be influencing investor behavior, leading to increased buying activity in the stock market [1].

Core Viewpoint - The article discusses the phenomenon known as the "January Effect," highlighting that despite severe winter weather, stock market performance remains strong during this period [1]. Group 1: Market Conditions - The U.S. is experiencing extreme winter weather, including Winter Storm Fern, which is causing significant disruptions [1]. - Investors are closely monitoring this critical time of year for stock market performance, indicating heightened market activity [1]. Group 2: Stock Market Trends - The article suggests that the January Effect typically leads to increased stock prices, particularly in January, as investors often buy stocks after year-end tax-loss selling [1]. - The current weather conditions are juxtaposed with the positive trends in stock performance, suggesting resilience in the market despite external challenges [1].

Core Viewpoint - Small-cap stocks have started the year strongly, raising hopes for impressive performances in 2026, with the Invesco NASDAQ Future Gen 200 ETF (QQQS) showing a year-to-date increase of 7.16% [2][4]. Group 1: Market Trends - The January Effect may be influencing the bullish trend in small-cap stocks, as they often rally at the beginning of the year, potentially leading to broader market gains [2][3]. - Historically, small-cap benchmarks like the Russell 2000 and S&P Small Cap 600 have underperformed large-cap indexes, but there is optimism that this trend may reverse in 2026 due to lower interest rates and a resilient U.S. economy [5][6]. Group 2: Investment Opportunities - Small-cap stocks and ETFs like QQQS are currently attractively valued compared to large-cap peers, indicating potential for closing the valuation gap [6]. - Smaller stocks are expected to deliver superior earnings growth relative to large-caps this year, supporting a positive outlook for QQQS in 2026 [7]. - Additional interest rate reductions could benefit QQQS by lowering borrowing costs, particularly as some of its holdings are rumored acquisition targets [8].

Core Viewpoint - Invesco is an independent investment management firm focused on enhancing the investment experience for individuals [1] Group 1 - Invesco emphasizes the importance of understanding investment objectives, risks, charges, and expenses before making investment decisions [1] - The firm provides educational content but does not offer specific investment recommendations or tax advice [1] - Invesco's opinions are based on current market conditions and may change without notice, indicating a dynamic approach to investment strategies [1] Group 2 - Invesco Distributors, Inc. serves as the US distributor for Invesco Ltd.'s retail products and collective trust funds [1] - The company operates through various affiliated investment advisers that provide advisory services without selling securities [1] - Invesco Unit Investment Trusts are distributed by Invesco Capital Markets, Inc. and other broker-dealers, highlighting the firm's extensive distribution network [1]

Company Overview - SoundHound has unveiled Amelia 7, a significant upgrade to its conversational AI platform, marking a transition from generative AI to agentic AI [1] - The company has carved out a niche in Voice AI, embedding its technology in vehicles and restaurants, distinguishing itself from text-based chatbots [3] Market Performance - SoundHound's stock rose approximately 12% in early January, with trading volume exceeding daily averages, indicating a potential shift in market sentiment [4] - Analysts maintain a bullish outlook on SoundHound due to its unique voice solutions and strong revenue growth, positioning the company to capitalize on the demand for independent voice AI [5] Financial Performance - The company's third-quarter revenue for fiscal year 2025 was $42.1 million, reflecting a 68% increase year-over-year, driven by its acquisition strategy [11] - SoundHound holds approximately $269 million in cash, providing a strong balance sheet and mitigating cash burn risks [12] Technological Advancements - The new Agentic AI capabilities allow vehicles to perform complex tasks autonomously, enhancing the utility of in-car voice assistants [6] - This innovation opens new revenue streams through transactional models, allowing SoundHound to earn fees for completed bookings [7] Competitive Positioning - SoundHound offers white-label solutions that allow car manufacturers to maintain brand identity and customer data sovereignty, which is increasingly important in the software-defined vehicle market [9] - The company’s independence from major tech giants strengthens its competitive moat [7] Valuation and Outlook - SoundHound's stock is currently trading near $11.00, which analysts view as undervalued compared to its growth trajectory, with price targets ranging from $15.00 to $26.00 [16][17] - The company aims to achieve Adjusted EBITDA profitability by the end of 2026, with a liquidity runway of over two years at current burn rates [20]

Core Insights - Wall Street experienced a mixed start to 2026, with the S&P 500 rising 0.2%, the Dow Jones Industrial Average increasing by 0.7%, while the Nasdaq fell by 0.3%. The small-cap Russell 2000 index outperformed with a 1.1% gain [2] Small-Cap Stocks Outlook - The early strength in small-cap stocks may signal the potential return of the "January Effect," where smaller companies' stock prices typically rise more in January due to year-end tax-loss selling [3] - Several macroeconomic factors are expected to support small-cap stocks in 2026, beyond the January seasonal pattern [5] Catalysts for Small-Cap Rally - **Favorable Macroeconomic Outlook**: Easing interest rates are anticipated to enhance small-cap stock performance, with Goldman Sachs highlighting compelling opportunities driven by expected rate cuts and accelerating earnings [6] - **Attractive Relative Valuations**: U.S. small caps are trading at a 26% discount to large caps, near historic lows, while international small caps are at an 8% discount despite higher forward earnings growth [7] - **Domestic Economic Advantages**: Small-cap companies benefit more from domestic revenue sources, positioning them favorably amid trends like reshoring and infrastructure development [8] - **AI as a Beneficiary**: Small caps may gain disproportionately from AI-driven productivity improvements, leading to larger percentage earnings growth compared to large caps [9] - **Increased Market Activity**: A rise in mergers and acquisitions (M&A) and a recovering IPO market in 2026 could create significant returns and validate small-cap valuations [10] Investment Strategy: ETFs vs. Individual Stocks - Investors may prefer small-cap ETFs for exposure due to the diversification they offer across over 2,000 companies, mitigating risks associated with individual stocks [11][12] Recommended Small-Cap ETFs - **Vanguard Russell 2000 ETF (VTWO)**: Offers exposure to 1,989 U.S. small-cap stocks, with a 12.2% increase over the past year and net assets of $13.7 billion [14][15] - **iShares Russell 2000 ETF (IWM)**: Provides exposure to 1,959 small public U.S. companies, gaining 12% over the past year with net assets of $74.42 billion [16][17] - **Vanguard Small-Cap ETF (VB)**: Covers 1,331 small-cap companies, with an 8.8% rise over the past year and net assets of $68.9 billion [18][19]

Core Viewpoint - The article discusses the potential for growth in three AI-related stocks—NVIDIA Corp., Micron Technology, Inc., and Palantir Technologies Inc.—due to the "January Effect" and ongoing demand in the technology sector driven by artificial intelligence [2][4]. Group 1: NVIDIA Corp. - NVIDIA is expected to experience strong growth driven by demand for its AI hardware, particularly its next-generation Blackwell chips and cloud GPUs [5]. - The easing of U.S.-China trade tensions, highlighted by the approval of H200 AI chip shipments to select customers in China, is seen as a positive development for NVIDIA [6]. - NVIDIA projects fiscal fourth-quarter 2026 revenues at approximately $65 billion, with a margin of plus or minus 2% [7]. - The company's expected earnings growth rate for the current year is 55.9%, with a Zacks Consensus Estimate for EPS at $4.66, reflecting a 12% year-over-year increase [8]. Group 2: Micron Technology, Inc. - Micron's high-bandwidth memory (HBM) chips are in continuous demand, supporting growth in 2025 and expected to continue this year [9]. - The company anticipates fiscal second-quarter 2026 revenues between $18.3 billion and $19.1 billion, mirroring revenue growth seen during the dot-com bubble [10]. - Micron's projected earnings growth rate for the current year is 278.3%, with a Zacks Consensus Estimate for EPS at $31.36, indicating a 185.9% year-over-year increase [11]. Group 3: Palantir Technologies Inc. - Palantir is positioned for growth due to the increasing adoption of its Artificial Intelligence Platform (AIP) among U.S. government and commercial clients [12]. - The company expects total revenues for 2025 to be between $4.396 billion and $4.400 billion, indicating growth in both client segments [13]. - Palantir's expected earnings growth rate for the current year is 42.5%, with a Zacks Consensus Estimate for EPS at $0.73, reflecting a 52.1% year-over-year increase [14].