January 2026 QiM Fact(or) Sheet
Summary
- Equities rallied, extending the risk-on sentiment from last quarter.
- U.S. economy remained resilient: although labor indicators softened and inflation stayed sticky, activity and consumer spending held firm.
- Ex-U.S. growth was lackluster: China remained soft, Japan subdued, and Germany was still weak.
- Sectors: Materials and energy led on of the back of popular dollar debasement narrative and geopolitics (Venezuela, Iran). Health care lagged on a Medicare Advantage rate shock.
- Countries: Taiwan and Korea led on semiconductor and IT hardware strength, while U.K. was supported by large miners.
- China benefited from precious-metals miners and insurance stocks.
- India showed broad weakness: trade tensions, lackluster earnings, and pre-budget caution—all weighed on foreign investor sentiment fuelling large outflows.
- Value leadership was largely sector-driven: energy, materials, industrials versus de-rated long-duration AI spender stories.
- Earnings season: share price reaction was dominated by “show-me” ROI sentiment on AI capex.
Exhibit 1: Tech divergence: software versus hardware relative return in January
Source: SEI, using data from FactSet. December 31, 2025, to January 30, 2026. Performance relative to the Russell 3000 Index
Factor families
Exhibit 2: Investable factor proxies versus respective capitalization weighted indexes
Outlook
Emphasizing Value family of factors based on:
- Wide valuation spread.
- Higher long-term interest rates (vs long-term average).
Exhibit 3: January 2026 Adaptive positioning
Source: SEI, the axis displays z-score exposure versus benchmark, as of January 30, 2026. Long term average exposure from January 31, 2003, to current. Benchmark: MSCI World Index.
Z-scores tell us how exposed a portfolio is to a factor, compared to a benchmark, based on what's normal for that factor. It is a common "currency" of portfolio exposures, making unrelated raw metrics like P/E or ROE comparable to each other.
A value of zero means the portfolio is neutral to the benchmark for that factor.
Higher values mean the portfolio has more exposure to that factor than the benchmark.
Economic indicators
U.S.: Economy remained resilient, with labour holding up and disinflation continuing unevenly.
Jobs: Hiring cools; layoff contained
- Nonfarm Payrolls: at 50K, below prior month (revised down to 56K from 64K).
- Unemployment Rate: 4.4%, marginally below expectations and prior month.
- Initial Jobless Claims: monthly avg. 206K, below expectations and previous month avg. 219K.
Inflation: Disinflation progress slows
- Core CPI: 2.6% (YoY), marginally below expectations and in line with prior month.
- Core PCE Deflator: 2.8% (YoY), in line with expectations and marginally above prior month.
- Hourly Earnings (preliminary): 3.8% (YoY), above expectations and prior month.
Consumer: Spending resilient; confidence weak
- Retail Sales: 0.6% (MoM, SA), above expectations and prior month.
- Michigan Sentiment (preliminary): 54.0 in line with expectations and above prior month.
- Consumer Confidence: 84.5, below expectations and prior month (pre-pandemic levels: 120-140).
Manufacturing and Services: Remained strong and in expansion territory
- Markit PMI Manufacturing SA (preliminary): 51.9, in line with expectations and prior month.
- Markit PMI Services, SA (preliminary): 52.5, in line with expectations and prior month.
- Empire State Index, SA: 7.7, above expectations and prior month.
Earnings: Margins stable; guidance and capex drive dispersion
- Reporting Progress: 13% of S&P 500 reported; 75% beat EPS
- Growth still positive: blended EPS +8.2% YoY; blended revenue +7.8% YoY.
- Margins holding up: blended net margin 12.8% (above 5Y avg; slightly below prior quarter).
- Guidance not improving (yet): early Q1 EPS guidance skew ~60% negative (tiny sample, but in line with 10Y avg).
- Price reaction asymmetry: beats get muted reward; misses are punished more (avg +0.3% vs -2.9% around prints).
- AI spend is the swing factor: hyperscale results and capex plans driving winners/losers; reactions have been mixed (e.g., MSFT disappointment vs META strength).
- Valuation backdrop: forward P/E about 22.1, above 5Y/10Y averages.
The rest of the world
China: Growth slowing; disinflation persists
- Industrial Output: 5.2% (YoY), above expectations and prior month.
- Exports: 6.6% (YoY), well below expectations and prior month.
- CPI: 0.8% (YoY), in line with expectations and above prior month.
- GDP: 4.5% (YoY), in line with expectations and below prior readings.
Japan: Inflation firm, activity subdued
- CPI Core National: 4.4% (YoY) in line.
- Industrial Production: -2.7% (MoM) in line.
- Manufacturing PMI: 50.0 in line.
- Services PMI: 51.6 below expectations and prior month.
Germany: Manufacturing still weak; services resilient
- CPI EU Harmonized: 2.0% (YoY), in line with expectations and prior month.
- Industrial Production: 0.8% (MoM), below expectations and prior month.
- Markit Manufacturing PMI: 47.0, in line with expectations and prior month.
- Markit Services PMI: 52.7, in line with expectations and prior month.
U.K.: Inflation sticky, activity holding up
- CPI: 3.2% (YoY), in line with expectations and prior month.
- PMI manufacturing: 50.6, marginally below expectations and prior month.
Sector and country returns
Exhibit 3: MSCI All Country World Index
Source: SEI, MSCI. As of January 30, 2026. Past performance is not a reliable indicator of future results.
Related articles
Glossary and index definitions
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