February 2026

To build a diversified portfolio, you need exposures to a broad set of market betas in addition to alphas that can come from US stocks, international stocks, and diverse set of credits not just government bonds.

Most investors prefer to increase FX hedge ratios or reduce US asset exposures. Further reduction in the USD share of global reserves is expected. Exposure to core Europe duration has increased, while sentiment is slowly turning more bearish.

USD slid and bond rallied. The strength in fixed income is increasingly noticeable as investors look for a safe haven to stay away from the intense volatility. AI disruption fears rattled the market spreading the sell-off seen in the software space to real estates and media as well.

If rate hike happens, financials could benefit from wider margins, while real estates and exporters can face pressure from higher borrowing costs and strengthening currency of a country. Weaker currency, on the other hand, can lift import costs alongside higher funding costs. This will squeeze corporate margins and offset the benefits of stronger international demand.