On February 5, 2026, Andy Wang, Managing Partner at Runnymede Capital Management, joined Schwab Network's Nicole Petallides to discuss the current market rotation, AI spending concerns, and where investors should be looking for opportunities.
During the segment, Andy shared his outlook on the economy and markets over the intermediate term.
Here are four key takeaways:
1. Alphabet's Capex Shock: Beating Expectations Isn't Enough Anymore
Google beat on earnings, beat on revenue, Cloud was up 48%, and net income rose 30%. By traditional metrics, this was an excellent quarter. But the stock sold off anyway.
The reason? Alphabet announced $175 to $185 billion in AI capital expenditures for 2026, nearly double last year and higher than Microsoft or Meta have guided. Deutsche Bank said Alphabet “stunned the world” with that number, adding “it's not clear whether that's a good or bad thing.”
The market is done giving AI spending a free pass. Investors want to see returns on investment, not just more investment. The same dynamic played out with AMD, which fell 17% despite CEO Lisa Su saying AI demand is accelerating faster than she ever imagined.
The market's message is clear: show us the profits, not just the promises.
2. The Rotation Is Real—And Small-Caps Are Leading It
Wednesday's market action told a clear story. The Nasdaq fell 1.5% while the Dow rose over 300 points. That divergence isn't noise, it's rotation in action.
Amgen jumped 8% on strong earnings. Honeywell gained 2%. Money is moving out of high-multiple tech and into value names, cyclicals, and small-caps.
The Russell 2000 held up better than the Nasdaq, down less than 1% versus 1.5%. Early reports show small-cap earnings growing around 24% year-over-year, roughly double the S&P 500's 12% earnings growth rate. Valuations are more attractive, earnings momentum is accelerating, and if the Fed cuts later this year, smaller companies with floating-rate debt benefit the most.
This doesn't mean abandoning tech entirely. But the days of just owning the Magnificent 7 and calling it a portfolio may be behind us. Diversification matters again.
3. Our Outlook: Cautiously Bullish Over the Next 3-6 Months
Despite the volatility, we remain constructive on the economy and markets over the intermediate term.
Government spending remains stimulative. Corporate earnings are solid, especially in small-caps. GDP growth continues. And the Fed has room to cut if inflation keeps moderating.
The ADP jobs report missed on Wednesday, just 22,000 jobs added versus 45,000 expected. That's a potential crack in the labor market worth watching, but it also gives the Fed more flexibility to act.
Our positioning favors the Russell 2000 over the S&P 500, cyclicals over mega-cap tech, and within tech we're being selective, favoring companies that are proving AI profitability over those that are just spending on promises.
4. Bitcoin's 45% Drop: Speculative Excess Getting Wrung Out
Bitcoin broke below $70,000 overnight and is now down about 45% from its October high near $126,000, the lowest level since before the election.
Three factors are driving this decline. First, Treasury Secretary Bessent told Congress he doesn't have authority to buy Bitcoin and wouldn't bail it out. Part of Bitcoin's 2024 rally was built on hopes of government adoption, and those hopes are fading.
Second, Kevin Warsh's Fed nomination is viewed as hawkish. Bitcoin thrives on liquidity and loose monetary policy, so a more hawkish Fed is the opposite of what crypto needs.
Third, Michael Burry is warning of a “death spiral” and calling Bitcoin “purely speculative.” When the investor who called the 2008 financial crisis says that, people listen.
Andy's read: Bitcoin is selling off hard while stocks hold relatively steady. That suggests this isn't systemic. It's speculative excess getting wrung out. The economy isn't cracking. Speculators are just learning that “number go up” isn't a strategy.
Andy's insights offered a clear framework for understanding the current market rotation and provided practical guidance for investors navigating a shifting landscape.
