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The Rotation and Avocados

  • Writer: Doug MacGray
    Doug MacGray
  • Feb 9
  • 5 min read

February 8, 2026


THE ROTATION CONTINUES: The Dow Jones Industrial Average (2.50%) and the Russell 2000 (2.17%) were both solidly positive for the week, but the S&P 500 (see below) and the NASDAQ Composite (-1.84%) ended the week in the red. The blue-chip Dow hit 50,000 for the first time on Friday. Of late, investors have grown wary of the AI stock run and moved money to so-called "real economy" stocks that rely on the entire economy to grow. The Dow is limited to 30 stocks that are supposed to indicate how the broader economy is doing, companies like Caterpillar, Boeing, 3M, Walmart, Johnson & Johnson, Coca-Cola, and Goldman Sachs, as well as tech giants like Apple, Nvidia, Microsoft, and IBM. Within the S&P 500, the tech sector (-2.0%) and communications services sector (-3.6%) were down, but stocks in the consumer defensive, industrials, materials, energy, health care, financials, real estate and utilities categories all rose. More on the stock rotation below.



LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.



INDEX RETURNS: Below is a four-way comparison of returns since April 2023. The green line is an exchange-traded fund that tracks the returns of the Magnificent Seven (Roundhill Magnificent Seven ETF). It clearly leads over this time period. In a distant second is the orange line, which represents the S&P 500. Coming in third is the Russell 2000, which represents U.S. small cap stocks. Bringing up the rear is the equal-weighted S&P 500. The S&P 500 index is cap-weighted, meaning the larger the capitalization, the more it is weighted in the index. The equal-weight fund includes the same 500 stocks in the index, but equally weights each company. As you can see, the Magnificent Seven component of the S&P 500, because their capitalizations are so high, has distorted the return of the index. Over this period, if you "timed the market" and bought just the Magnificent Seven and rode it, you would have had an outstanding run, especially compared to the rest of the U.S. stock markets.


THE ROTATION: If we go back to the beginning of 2025 and track returns of those four indices, we get a different result. It is pretty close, but the Russell 2000 outperformed them all. The S&P 500 still came in second. The Magnificent Seven began to show some vulnerability compared to the broader market, coming in third.



THE ROTATION OF LATE: If we start the race in late October of 2025, we see a different picture altogether. The Magnificent Seven has lost nearly 8%! The Russell 2000 and the equal-weight S&P 500 have led the way.



A POSITIVE U.S. MANUFACTURING REPORT: According to the latest Institute for Supply Management Manufacturing (ISM) PMI report, the manufacturing sector in the U.S. expanded in January for the first time in 12 months. This index has been mostly in contraction territory for nearly three years. The report came in with a score of 52.6 (anything above 50 means growth), a 4.7% increase from December. The new orders component of the index rose nearly 10 points to 57.1.


U.S. SERVICES SECTOR REMAINS POSITIVE: The ISM Services index for January stayed the same as December's reading of 53.8, also indicating growth in the sector.

PRIVATE SECTOR ADDED 22,000 NEW JOBS: According to ADP, private businesses added 22,000 net new jobs in January, less than what the Wall Street consensus had predicted (45,000), and a cause for some level of angst as the labor market continues to limp along while the economy grows.


AVOCADO RELIEF: The U.S. sources about 90% of its avocados from Mexico. Prices for avocados in Mexico are down 19% from one year ago. A very healthy Mexican harvest aided by heavy rainfall has led to record U.S. imports, pushing supplies higher and lowering prices just in time for the Super Bowl. Bring on the guacamole.


PUTTING MONEY IN PERSPECTIVE: I was reading a book this past week that quoted a woman named Letitia Baldridge. She met Jacqueline Kennedy in school and then went to college with her. She eventually went to work on John F. Kennedy's campaign and worked for the First Lady after he won. She then created her own PR business and wrote a weekly syndicated column and wrote many bestsellers. One of her books discussed what money cannot buy, and in that book, she provided a top ten list of what money can and cannot do.


The list follows:

10. Money can buy a bed, but not sleep.

9. Money can buy books, but not brains.

8. Money can buy food, but not appetite.

7. Money can buy finery, but not beauty.

6. Money can buy a house, but not a home.

5. Money can buy medicine, but not health.

4. Money can buy luxuries, but not culture.

3. Money can buy amusement, but not happiness.

2. Money can buy companions, but not friends.

1. Money can buy flattery, but not respect.


ALMOST OVER: By the time this email goes out, the Super Bowl will be in full swing. I read a rather unfair commentary today that said it is the game that pits the team no one cares about (Seattle) against the team everyone hates (New England). Regardless, a bunch of young men have worked very, very hard to gain the privilege to be in this game, and I am happy for all of them. I, of course, am remaining neutral.



Have a great week!


Our purpose is to honor God by helping our clients see the objective, find the path, and navigate past the obstacles to a more prosperous future.



Douglas R. MacGray, J.D., C.F.P. ®

President

Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax

(610) 628 4545



"Find a mission that you can give yourself over to and then spend your days moving that mission forward. Man is made so that when anything fires his soul the impossibilities vanish. The influence of each human being on others in this life is a kind of immortality." John Quincy Adams*


"For the love of money is a root of all kinds of evil." I Timothy 6:10 (NIV)


*In commemoration of the 250th anniversary of the United States, I am finding a quote from a president each week, in order. This is the sixth week, and John Quincy Adams was our sixth president.


SOURCES:

INDEX RETURNS: YCharts.com

THE ROTATION: YCharts.com

THE ROTATION OF LATE: YCharts.com

PUTTING MONEY IN PERSPECTIVE: Taste: Acquiring What Money Can't Buy, Letitia Baldrige, 2007; God, Man, and Mammon, Mitch Anthony, 2024


(c) 2026 Anno Domini, Stonecrop Wealth Advisors, LLC, All Rights Reserved


Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.


SDG

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.

*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.

*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.

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