Where is the Money Flowing?

Research Notes February 2026 > https://www.unum.capital/post/rfeb2026

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Published: Tuesday, 03 February 2026

Time: 20h50 (US Trading Session, South African Time)

The screener reveals a market characterized by aggressive defensiveness. Professional capital is rotating out of high-beta Growth and into “boring” factors like Low Volatility and Value, but doing so with significant velocity.

While the assets are defensive, the behavior is aggressive: traders are chasing price strength in safety sectors rather than speculating on tech. The dominant trade is a bet on the “forgotten middle” (Mid-Caps) and interest-rate sensitivity (Homebuilders), signaling a belief in a soft landing where the average stock outperforms the index giants.

Size Factors 📏

• Small Cap 🐜: High Conviction. The presence of multiple dedicated Small Cap funds (SMLV, XSLV, IJR, SPSM, VIOO, XJR) indicates that risk appetite has broadened significantly beyond the mega-caps. Traders are stepping down the market cap ladder to find alpha.

• Mid Cap ⚖️: Dominant. This is the strongest cluster in your screen (RFV, RWK, MDYV, IVOV, XMLV, CZA). The market is treating Mid Caps as the “Goldilocks” trade—offering better valuation than Large Caps but more stability than Small Caps.

• Large Cap 🐳: Muted / Selective. Broad market-cap-weighted Large Cap exposure is notably absent. It only appears when filtered through specific factors like Low Volatility (LGLV, SPLV) or Equal Weighting (RSPS). The “Magnificent Seven” trade is not powering this specific momentum screen.

Style Factors 🎨

• Value 🏷️: Leading. Value is explicitly driving momentum (RFV, MDYV, PEY, RDIV). The market is rewarding low multiples and fundamental valuation over speculative future earnings.

• Quality 💎: Implicit Support. While “Quality” isn’t the primary label, the presence of “Dividend Achievers” (PEY) and S&P 600/400 indices (which have strict earnings eligibility rules) suggests a bias toward profitable, established companies rather than speculative junk.

• Growth 🚀: Absent. There is a stark lack of “Pure Growth” or “Momentum” (in the traditional factor sense) ETFs. Growth stocks are currently failing to meet your momentum tier criteria relative to their Value counterparts.

• Momentum 🌊: The Paradox. This is a momentum screener, but it is not picking up “Momentum Factor” ETFs. Instead, it reveals that Value and Low Volatility are the current Momentum trade. The technical strength has rotated into defensive sectors.

Risk & Yield Factors ⚠️

• Low Volatility 🛡️: The “Screaming” Signal. This is the most crowded factor in the list (SPLV, SMLV, XMLV, LGLV, ACWV, XSLV). It signals a massive “Flight to Safety” within equities. Pros are participating in the upside but are terrified of drawdowns.

• High Yield / Dividend 💰: Strong Bid. Funds like PEY, SPYD, and RDIV show that total return (price + yield) is the current focus. This often correlates with a defensive posture or a play on peaking interest rates.

• Profitability 📊: Positive. The screen filters out non-earners by heavily favoring indices (S&P 400/600) that require trailing profitability for inclusion.

• Liquidity 💧: High. The screen is populated by highly liquid, standard-issue ETFs (Invesco, SPDR, iShares). Professional flows are staying in vehicles where entry and exit are easy; they are not venturing into obscure, illiquid corners yet.

• Carry 🎒: Active. The strong showing of High Yield and Dividend Achievers suggests institutional money is hunting for carry (yield) as a substitute for fixed income.

Thematic & Sector Factors 🏗️

• Defensive 🏰: High. Between Low Volatility and Consumer Staples (RSPS), the defensive posturing is aggressive.

• Cyclical 🔄: Interest-Rate Dependent. The cyclical exposure is very specific: Homebuilders (ITB, XHB) and Consumer Discretionary (RSPD). These are interest-rate sensitive cyclicals, likely front-running a dovish Fed policy.

• ESG 🌿: Niche. Only one explicit ESG fund (XJR) appears. ESG is not a primary driver of current momentum flows.

• Multi-Factor 🧩: The Winning Strategy. The strongest signals come from combined factors: “Small Cap + Low Volatility” (SMLV) or “Mid Cap + Value” (MDYV). The market is rewarding specific intersections of style and size rather than broad beta.

Investment Factors 🏭

• Investment (Capex) 🏗️: Sector Specific. The strength in Homebuilders (ITB, XHB) and Water (CGW) implies a belief in continued infrastructure or residential investment, despite the defensive tone elsewhere.

Note: This screener is subject to change as the news flow and the price action develops.

Lester Davids

Senior Investment Analyst: Unum Capital