(Bloomberg) -- It isn't just a technology selloff in emerging markets. It's a full-fledged rotation away from cyclical stocks and into defensive ones.
Let's bust that jargon: Companies whose fortunes are closely tied to economic growth, such as those making car parts, have fallen out of favor in the past month. Firms whose products are in demand regardless of economic cycles (no matter what, people will shave) are rallying in their stead.
While a renewed slump in developed markets has been led by technology stocks, emerging markets are incurring losses across a broader spectrum. Even though investors remain bullish on long-term prospects for developing nations, they are acknowledging the return of volatility by hedging their bets.
That's leading to a two-speed market. Utility companies, makers of consumer staples and health-care firms have been among the best performers in the past month. Finance companies, makers of consumer-discretionary products and commodity producers have had the worst losses.
There's evidence that this is a short-term phenomenon. Money managers from UBS Group AG to Aviva Investors have said that they are making tactical adjustments to their portfolios, to bring in some caution in their overall bullishness. That's in response to fluctuations in the first quarter that left stocks without a decisive direction.
To contact the reporter on this story: Srinivasan Sivabalan in London at ssivabalan@bloomberg.net.
To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Rita Nazareth at rnazareth@bloomberg.net, Alec D.B. McCabe
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