The market has aggressively moved into defense

2026 began on global markets with an unexpected leader. While investors continue debating the outlook for the US, China, and Europe, South Korea is confidently pulling ahead and showing one of the strongest dynamics in the world.

An important shift is clearly happening: capital is gradually leaving the technology sector and flowing into more defensive segments. This does not look like a panic crash or the start of a total collapse, but it is exactly what investors call rotation – a redistribution of money in favor of stability. And the very fact of such movement is already a serious signal.

Technology, which in recent years was the main engine of growth, suddenly stops being the “default natural choice.” The market starts behaving as if risk is no longer being paid with a premium, and caution becomes the main priority.

Technical signal: Nasdaq breaks the short-term trend. One of the key moments is that Nasdaq has fallen below its 50-day moving average. For most institutional investors, this is not just a line on the chart, but an important boundary of the short-term trend. As long as the index stays above it, the market is perceived as stable. When a downside break occurs, it is seen as a warning: the growth impulse is weakening.

An additional alarming factor is the so-called distribution days. Over the last five trading sessions, the market has already recorded four days when declines were accompanied by increased volume. This is a classic sign that large funds and professional participants are not simply “waiting,” but are starting to unload positions.

Such periods often become a transitional phase: the market has not collapsed yet, but big money is already changing portfolio structure.

Under pressure: software, chips, growth stories. The segments most sensitive to the “risk-on” mood suffered the most:

• software (IGV −4.6%)
• semiconductors (SMH −2.5%)
• growth companies, where valuation is built on expectations of future profits

Even Palantir’s report, which was strong on its own and one of the best of the season, could not turn the sector around. This is an important detail: when even good news does not trigger sustainable growth, it means the market does not want risk as an asset class right now.

In such moments, sentiment is driven not by individual company fundamentals, but by the overall regime: investors start reducing exposure to growth regardless of report quality.

Capital moves into defense: where exactly

At the same time, there is an active inflow of funds into defensive sectors. This is typical market behavior during a caution phase, when investors prefer stable cash flows and predictability.

Consumer staples. Companies in the staples category become a shelter again:

• Pepsi rose 5% after earnings
• Walmart broke $1 trillion market cap for the first time

This is symbolic: the market is betting not on “revolutionary technologies of the future,” but on businesses that sell everyday goods regardless of the cycle.

Energy, commodities, metals. Interest in real assets has also strengthened sharply:

• XLE +3.2% (energy)
• XME +5% (metals and mining)
• silver +8%
• gold +6%

The rise in gold and silver is a classic indicator of defensive behavior. When money flows into precious metals, it is rarely a sign of optimism. Rather, it is a signal: the market wants insurance.

Why is this happening? Such rotation usually appears when investors begin pricing in new risks:

• uncertainty around rates and bond yields
• fears of economic slowdown
• overheated valuations in tech
• expectations of tighter financial conditions
• fatigue from capital concentration in a few mega-tech names

It is important to understand: this does not necessarily mean the start of a bear market. But it does mean a regime change. S&P 500 is still holding – the market has not broken yet

The key point: despite Nasdaq weakness, the S&P 500 index has held its 50-day line. This suggests the market still looks more like rotation than a full bear trend.

Technology is falling, but money is not leaving the market entirely – it is simply changing address. This is crucial: in a crash, capital runs into cash; in rotation, it moves into other sectors.

What this means for an investor’s strategy. In such periods, the market requires not heroism, but discipline. The main conclusions look like this:

• less aggressive impulse buying of growth
• risk control and exposure management in tech
• increased attention to defensive segments
• updating the watchlist with new leaders
• readiness for continued volatility

The market is nervous right now. And a nervous market is not a time for chasing profit, but a time for position management.

Next triggers: what will determine the move. The coming weeks will depend on several factors:

• earnings from the largest companies
• market reaction to bond yields
• rate dynamics and Fed expectations
• whether Nasdaq can quickly reclaim the 50-day moving average

If the index does not recover this level soon, pressure on the technology sector may intensify, and the rotation into defense may become deeper.

The market is now choosing between two scenarios: either this is temporary cooling, or the beginning of a more prolonged transition into a cautious phase. And the very next sessions will show which path becomes dominant.