Raymond James reports emerging evidence that market positioning is tilting back toward risk-on assets as the traditionally softer January-to-February period draws to a close. The firm's analysis of market internals indicates improving conditions that it interprets as investors repositioning for greater exposure to risk-oriented equities.
The firm highlights that investor sentiment and the CBOE Put/Call ratio have moved to near-neutral readings after recently approaching levels the firm characterizes as bullish extremes. Those prior extremes were, in Raymond James' view, consistent with intermediate-term corrective phases, and the retreat toward neutrality is one signal the firm points to in assessing market direction.
Market breadth and internals, the firm says, are strengthening. Raymond James calls out relative performance ratios that tend to shift with risk preference: growth stocks versus the broader market and consumer discretionary versus consumer staples. Both ratios are exhibiting patterns suggestive of a rotation back toward risk-on positioning.
The S&P 500 ETF (SPY) is cited in the firm's note as trading at $689.43, approximately 1% below its 52-week high of $697.84. Raymond James notes SPY's year-to-date return of 1.1% and a one-year gain of 16.27% as context for the current market environment.
Software shares receive particular attention. Raymond James observes that software stocks have retraced to a significant technical support level close to their four-year moving average. The firm states that a broader shift into risk-on assets should help underpin a tradeable rally in software names, given their sensitivity to market sentiment and growth positioning.
Earlier in the month, in a February 2, 2026 report, Raymond James identified seven technical negatives that, in the firm's assessment, supported near-term choppiness during the seasonally weak January-to-February stretch. The firm says that sustained strength in risk-on ratios would imply the choppy consolidation phase across equity markets from January to February has ended and that a new intermediate-term rally phase of roughly three to six months is attempting to establish itself.
Independent data points and regional developments are included in the broader market roundup accompanying Raymond James' commentary. The Federal Reserve Bank of Dallas reported that its trimmed mean PCE price index rose at an annualized rate of 1.5% in November, an alternative measure of core inflation that excludes extreme price movements to clarify underlying trends.
On labor market metrics, ING analysts characterize the U.S. job market as cooling but not collapsing, describing the environment as a "low hire, low fire economy." The JOLTS report showed job vacancies decreased to 7.15 million, below the consensus expectation of 7.65 million.
In emerging-market and geopolitical notes, Argentina purchased $808 million in drawing rights from the United States while Latin American markets showed mixed results. The MSCI Latin American currencies index fell 0.3% and regional equity markets remained subdued.
Goldman Sachs' assessment of winter storm Fern concluded the event is unlikely to have materially affected January nonfarm payroll growth because the storm occurred after the payroll survey reference week, so most workers were counted as employed. Separately, U.S. Treasury official Bessent emphasized the relationship between productivity and employment and highlighted the Federal Reserve's role in monitoring the timing of economic policy under Kevin Warsh's leadership.
InvestingPro rates SPY's overall financial health as "GOOD," with additional data and metrics available to subscribers.
Key points:
- Market internals and breadth are improving, supporting a potential rotation toward risk-on assets.
- Relative sector ratios - growth vs the broad market and consumer discretionary vs staples - are shifting toward risk-on preferences, which could favor cyclical and growth sectors, including software.
- SPY sits near its 52-week high and has posted a 1.1% YTD return and a 16.27% one-year gain, providing context for the current market stance.
Risks and uncertainties:
- The market's recent move from bullish extreme sentiment back toward neutral could reverse; persistent negative breadth or internals would undermine a sustained rally, impacting equities broadly.
- Labor-market cooling, evidenced by a drop in job vacancies to 7.15 million, introduces uncertainty for consumer-facing sectors and could weigh on consumer discretionary demand.
- Weakness in Latin American currencies and subdued regional stock markets, coupled with sovereign actions such as Argentina's $808 million drawing rights purchase, represent tail risks for emerging-market exposure.