Schroders Equity Lens February 2026: your go-to guide to global equity markets
Special update on Magnificent-7 fundamentals.
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The February 2026 edition of the Schroders Equity Lens is now available: Schroders Equity Lens
Summary:
Special update on Magnificent-7 fundamentals, courtesy of Schroders global equity team (slides 6-14):
- Commitment to spending remains high. Big tech willing to cut free cash flow (FCF) close to zero.
- Revenues are coming through, but impact on earnings is offset by high depreciation and amortisation costs
- Doubts on hyperscaler return-on-investment (ROI) likely to remain until a floor is found on the capital intensity of these new revenues.
- Limited signs of innovation slowing for those using the technology.
Regular update:
- EM has had a flying start to 2026, the US continues to lag (slide 16).
- Valuations may be rich but US equities usually rally when the Fed re-starts rate cuts and there isn’t a recession (slides 17, 30)
- Low correlation and high performance dispersion among the mega caps is a healthy sign that investors are differentiating. Fundamentals matter. (slide 18)
- Investors who are worried about AI risk but don’t want to sacrifice equity exposure should consider value equities. They have a low correlation with AI-stocks and have delivered significantly better outcomes in down-markets for AI-stocks (slide 19).
- Buyer beware: most passive approaches to value investing are unlikely to shield you from AI/tech risk. Most have significant exposure to Magnificent-7 and/or other technology names. To manage this properly, you need an active approach (slide 20).
Charts of the month:
Buyer beware: most passive approaches to value investing are unlikely to shield you from AI/tech risk
Most have significant exposure to Magnificent-7 and/or other technology names
Largest five holdings | |||||
MSCI USA Value | MSCI USA Value Weighted | MSCI Enhanced Value | Russell 1000 Value | S&P 500 Value | S&P 500 Pure Value |
Alphabet A | Apple | Micron Technology | Berkshire Hathaway | Apple | Ford |
Meta Platforms | Microsoft | Cisco Systems | JP Morgan | Amazon | Bunge Global |
JP Morgan | JP Morgan | Intel | Alphabet A | Exxon | General Motors |
Berkshire Hathaway | Exxon | General Motors | Amazon | Walmart | Mosaic |
Exxon | Amazon | AT&T | Alphabet C | Tesla | Centene |
As at 31 December 2025. Source: MSCI, FTSE Russell, S&P. Please see relevant disclaimers on page 66 of attached document.
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