Five for Friday — February 13, 2026

Software selloff, Rotation, Global, Jobs, Friday the 13th 

1. Selloff 

Software, the second-biggest industry in the S&P 500 to start the year, is in a bear market on fears that AI tools will erode the sector’s business model. As with most selloffs of this speed and magnitude, it’s “sell first, figure it out later” crowd psychology. Now, don’t get me wrong: the potential for AI disruption is immense and some AI-enabled tools are incredible (which, ironically, helps justify the massive capital spending from firms like Alphabet and Amazon that has also spooked investors). But here’s my take: enterprise software as a “thing” is not just going away overnight. For major companies, switching costs are high, economies of scale are obvious, and cybersecurity concerns are paramount. A lot of babies are being thrown out with the bathwater. Those considering “buying the dip” should remember that 1) it’s too soon to tell which companies have staying power—some stocks will end up looking like steals and others will be disrupted out of existence; and 2) Buying “low” doesn’t mean quick profit as it could be years before the market rewards your thriftiness. Adding to positions in higher quality, diversified software names makes sense to me with the sector now as cheap relative to the S&P 500 as it’s been in 25 years—but only if you have a longer time horizon and higher risk tolerance.

2. Rotation

Another factor in the “sell software” trade is the array of viable alternatives. While Tech has lagged, most other sectors have worked—from cyclical industries like Energy Equipment & Services (+33% ytd), Leisure Products (+29%), and Machinery (+23%) to higher-yielding laggards like Food & Staples Retailing (+15%) and Tobacco (+15%). Tech’s weakness has muted the S&P 500’s return in 2026 so far (+1%), but some 350 stocks in the index are positive on the year and the S&P 500 Equal Weight index is at all-time highs. Perhaps it’s partly a “What can’t AI disrupt right now?” trade, but breadth is a positive for markets regardless.

3. Global

Speaking of breadth, international stocks have started the year much as they ended 2025—outperforming U.S. stocks. Over the 12 months ending in January, the MSCI All Country World ex-US index outperformed the S&P 500 by over 19%, the most since 2009. Catalysts include a weaker U.S. dollar, strong revisions to global earnings estimates, and—importantly for the potential duration of the move—structural changes to foreign economies (Japan’s corporate reform, EU’s fiscal spending, etc.). I wouldn’t bet against the U.S.’s record of innovation or business-friendly environment, but I imagine there are many investors who’ve thrown in the towel on global stocks and could benefit from legging back in.

4. Jobs

After months and months of fairly dour labor market data, January’s nonfarm payrolls report was a nice reprieve with the most jobs added since 2024, decreasing unemployment rate, etc. The most interesting takeaway to me was the unemployment rate for workers aged 20-24 dropping to a 20-month low of 7.1%, well below the long-term, non-recession average. Amid fears that AI will erase the entry-level job, I’ll take this as a mildly promising sign.

5. Happy Friday the 13th

Fear of this day (“paraskevidekatriaphobia”) has been estimated to lead to lower spending and short-lived economic damage, but stocks have seen the opposite. Over the last 75 years, the S&P 500 has averaged a 0.16% gain on Fridays that land on the 13th, over 4x higher than the +0.04% all-days average. Not so spooky after all!

Disclosures

This is not a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Market and economic statistics, unless otherwise cited, are from data provider FactSet.

This report does not provide recipients with information or advice that is sufficient on which to base an investment decision.  This report does not take into account the specific investment objectives, financial situation, or need of any particular client and may not be suitable for all types of investors. Recipients should not consider the contents of this report as a single factor in making an investment decision. Additional fundamental and other analyses would be required to make an investment decision about any individual security identified in this report.

For investment advice specific to your situation, or for additional information, please contact your Baird Financial Advisor and/or your tax or legal advisor.

Past performance is not indicative of future results and diversification does not ensure a profit or protect against loss. All investments carry some level of risk, including loss of principal. An investment cannot be made directly in an index.

Copyright 2025 Robert W. Baird & Co. Incorporated.

Other Disclosures

UK disclosure requirements for the purpose of distributing this research into the UK and other countries for which Robert W. Baird Limited holds an ISD passport.

This report is for distribution into the United Kingdom only to persons who fall within Article 19 or Article 49(2) of the Financial Services and Markets Act 2000 (financial promotion) order 2001 being persons who are investment professionals and may not be distributed to private clients.  Issued in the United Kingdom by Robert W. Baird Limited, which has an office at Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB, and is a company authorized and regulated by the Financial Conduct Authority.  For the purposes of the Financial Conduct Authority requirements, this investment research report is classified as objective. 

Robert W. Baird Limited ("RWBL") is exempt from the requirement to hold an Australian financial services license.  RWBL is regulated by the Financial Conduct Authority ("FCA") under UK laws and those laws may differ from Australian laws.  This document has been prepared in accordance with FCA requirements and not Australian laws.