US investor risk appetite weakens for 1st time in 5 months

US investor risk appetite retreated in February for the first time since September 2025.

The Risk Appetite Index in the S&P Global Investment Manager Index survey fell to 13% in February from 41% in January, according to monthly survey results released Feb. 10. The index measures net risk appetite among surveyed investors, with those reporting a high tolerance or aversion counting with double weight. Negative index values represent net risk aversion.

Though still positive, market sentiment softened as fund managers reevaluated their positions across sectors and treaded "a more cautious path in February compared to the start of 2026," Chris Williamson, executive director at S&P Global Market Intelligence and author of the Investment Manager Index report, said in comments released with the survey results.

"While both the earnings and US economic outlooks have brightened, buoying favor toward sectors such as industrials and basic materials, concerns over valuations, the political environment, AI impact, and reduced policy stimulus have dented investor favor toward tech and financials alongside longer-running disenchantment toward consumer discretionary and real estate," Williamson said.

While the S&P 500 rose 1.4% in January, it was outperformed by the small-cap-focused Russell 2000 index, which gained 5.3%. Moreover, the S&P 500's IT industry, one of the strongest segments in 2025, was among the worst-performing segments in January, with gains for the index instead led by the energy and materials sectors.

The signals point to a general broadening of returns in equity markets that is not unusual given current market dynamics, Gary Pzegeo, managing director and chief investment officer for CIBC Private Wealth, said in an interview.

"It has been a very concentrated rally in the US, in large cap stocks and in large cap tech, and you get to a level where people start to wonder if it's getting into dangerous territory, and you hear concerns about a market bubble," Pzegeo said. "It doesn't take much for markets to then start to rotate and look for other opportunities."

S&P Global's Investment Manager Index survey includes monthly responses from a panel of just under 300 participants employed by firms that collectively represent approximately $3.500 trillion in assets under management. Data was collected Feb. 2–5. If you would like to receive the full report on a regular basis or participate as a panel member, please email economics@spglobal.com.

Equity return expectations reach survey high

Investor outlook also soured toward near-term market gains for the first time since September 2025.

The Investment Manager Index survey's Equity Returns Index plummeted 49 percentage points to negative 7% in February from a 42% survey-high in January. The score reflects the percentage of respondents expecting an improvement in equity returns over the 30 days following the end of the survey, minus the percentage expecting net equity losses.

Of the eight factors evaluated by investors for their influence on market returns, six received positive sentiment scores based on survey data, while only political environment and equity valuations received negative scores.

Investors were the most optimistic for equity fundamentals and the US macroeconomic environment, with index scores of 45% and 35%, respectively. The optimism coincided with a strong US GDP growth report for the third quarter of 2025 and bullish estimates for corporate earnings performance.

Compared with the other market factors, the index score for central bank policy fell the most in February, down 34 percentage points from January while remaining positive at 13%.

Central bank policy was viewed as the most supportive market factor in the survey during the previous five months as the US Federal Reserve announced three interest rate cuts from September 2025 to December 2025. However, expectations are uncertain regarding when the Fed may pursue its next rate cut.

Overall, index scores in February weakened for five market factors and improved for three: US macroeconomic environment, valuations and equity fundamentals. However, score increases in these three categories were slight, led by the US macroeconomic environment with a gain of only three percentage points from January.

Industrial moves up as favored sector

Investors had a positive net outlook for market performance in nine of the 11 sectors tracked by the survey.

The index score for industrials moved up three percentage points from January, to 43% in February, becoming the most favored sector among investors.

The energy sector's index score climbed the most, rising to 34% in February from 4% in the previous month. The S&P 500 energy sector's returns recorded the best performance among the index's sectors in January with a 14.4% gain.

The index score for financials slid 30 percentage points month over month to 26% in February. This marks the largest decline among sectors after the financial industry ranked as the most favored in January.

The real estate sector continued to be the least favored by investors in February.

The index score in February rose from January for only three sectors: industrials, energy and consumer staples.