Investors rotated into consumer staples and healthcare, selling cyclicals as rising yields heightened rollover risks in elevated leading indicators.
Global equities fell on Tuesday, with the S&P 500 and Stoxx 600 both declining 0.7%. The shift followed a rotation from value and growth stocks into defensive sectors like consumer staples and healthcare, funded by cyclicals such as tech, industrials, and materials, which dropped 2-3%.
European banks had previously outperformed real estate by 7 percentage points over the past month as long-end yields rose. However, the latest move reflects a broader defensive preference amid concerns over higher yields increasing rollover risks in already elevated leading indicators.
Futures pointed to further declines, reinforcing expectations of continued defensive outperformance. Analysts noted that such rotations typically accompany heightened macroeconomic uncertainty and potential downturns in leading indicators.