An article in the FT last week ‘Wall Street’s anything-but-tech trade shakes up US stock market’ highlighted fund flows into everything but the tech sector.
“US equity funds focused on shares outside the tech sector have attracted $62bn of inflows over the past five weeks, eclipsing the $50bn that investors added to such funds in the whole of 2025, Deutsche Bank data shows.”
This is leading to significant dispersions in performance across the US stock market by sector as the article went on to highlight.
(N.B. from no charts/diagrams last week, I’m giving you 7 today!)
1. Tech V Other Sectors in US Equities
At the same, time articles like ‘Doubling Down on EM Equities’ from our global macro analysts TS Lombard are encouraging investors to focus away from US equities to markets where rewards of late have been significantly higher.
Our investment team spotted this table on LinkedIn this week, showing the return from around the world equity markets in US Dollars. Whilst the return from the US market was still a whopping 19% in $’s (less in £’s), returns from other markets around the world left the US market in their wake.
2. US Equities vs the Rest of The World
Whilst there is speculation over the causes of this big rotation, be it; fear of dollar depreciation, fear of an AI bubble or worries over US domestic and international politics, the undeniable factor we see is share prices.
We know for sure that on the back of:
first an acceleration of digitisation during Covid as we all reached for video conferencing and cloud-based infrastructure during the lockdowns
then the excitement over AI,
and fanned by the positive feedback of passive investing
the valuations of big US tech stocks, which dominate US and global indices, were very stretched relative to historic norms.
In 2025, we weren’t exactly sure how that would manifest, but we were confident the rise in share prices of these companies, at the rate enjoyed from the end of the great financial crisis up until last year, was not sustainable. It just wasn’t mathematically plausible.
Tideway Equity Positioning
I’m pleased to report that having reached this conclusion towards the end of 2024, we have been positioning our equity investments for just this scenario.
Away from Tech and in rest of the world markets.
Here below are our current ‘look through’ weightings when we analyse the equities in our Equity Blend portfolio’s selected funds versus the MSCI All Countries World Index, showing a 13% relative underweight on Tech.
3.Tideway Equity Blend Sector Exposure Looking Through to Our Underlying Fund Holdings
Below, Nick Gait goes on to look at our exposures to Emerging Markets with our global equity managers allocating to Emerging Markets as well as our specialist Emerging Market fund.
The net result has been a substantial nominal return and relative outperformance so far this year with our Equity Blend portfolio return more than twice the MSCI world index.
4. Tideway’s Equity Income and Equity Blend Portfolios Returns in 2026 YTD vs Peers (IA Global) and the MSCI World Index
4. Tideway’s Equity Income and Equity Blend Portfolios Returns in 2026 YTD vs Peers (IA Global) and the MSCI World Index.
Looking under the bonnet at the individual funds and back over the last 3 months we can see the massive dispersion of returns, with a near 25% gap between our top performing actively managed fund and the Nasdaq index in just 3 months.
5. Tideway’s Selected Actively Managed Funds vs the US Index and the Nasdaq over the last 3 Months
Source: FE Analytics 19/02/2026
It goes without saying that past returns are no guarantee of future returns, but certainly in the last three months we have gone from keeping up with US indices but without the concentration risk of US big cap tech, to substantially outperforming US big cap tech.
We don’t know how long this rotation will last and how far it will go and it would be a brave commentator who wrote off US big cap tech.
We do know the overvaluation of US equities, distorted by the big cap techs, was extreme. This table from M&G Investments (spotted by our analyst Costa Michaelides), looking at how often US equities had been so highly valued, made us laugh for its sparsity of data!
6. When Have US Equities Been More Expensive?
And this chart from Datastream reminds us how concentrated on US equities passive investors have become.
7. Increase In US Equity Exposure for Passive MSCI World Investors
With momentum building it feels to us like the rotation still has some way to go.
It is worth remembering here that we are not writing off the US economy, which looks very resilient and the US remains our biggest market exposure (see below). Nor are we betting the ranch that tech will not lead the way ultimately in generating returns, our funds still have significant tech exposure. What we have done is tilted away from the most expensive mega cap tech companies whose valuations were extremely high.
The return on our equity investments has fed through to all our multi asset portfolios which are ahead of benchmarks year to date and in the last three months.
Our first webinar ‘2026 Market Insights and Tax Year End Planning’ is taking place on Thursday, 5 March at 6:00pm, and it comes at a point in the year when markets have already given investors plenty to think about.
We’ll be cutting through the noise to discuss what’s been driving returns so far in 2026, what risks are being underestimated, and what we are doing in response.
We’ll also cover how to make sure you’re not leaving value on the table by failing to use your available tax allowances, such as pension and ISAs contributions, as well as annual gift allowances before the tax year end. We will also look at the benefit of using March as the month to make any one-off annual pension withdrawal for next year’s spending or to start to minimise the ultimate impact of IHT on your pension account.
As ever, you can send questions ahead of time or put us on the spot during the session.
