The volatility racking markets this month is the latest chapter in investors’ struggle to adapt to a world of reduced central-bank stimulus.
Even after a sharp rally Tuesday, the Dow industrials DJIA, +2.17% are off 2.5% this month and on course for their worst start to a quarter since 2016. Treasury yields have shot to multiyear highs, pressuring shares from New York to Hong Kong to London.
Many investors say the turbulence reflects the early stages of what they call a rotation, a pragmatic decision to reallocate resources away from assets whose gains now appear at risk—in this case, to sectors such as safer bonds and away from the most highly valued stocks.
Where big U.S. stocks once appeared immune to the appeal of other asset classes, thanks in part to the volatility-dampening impact of extraordinary stimulus, now rising yields are driving a retreat from previous winners such as giant technology shares. It is the strongest sign yet that investors’ faith in the postcrisis “risk-on” dynamic driven by stimulus is splintering.
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