A monthly gain not seen in nearly three decades has put the scale of the current flight from technology stocks into sharp relief.
The MSCI consumer staples index climbed 10.6 per cent in October, its strongest monthly performance in close to 30 years, as money poured out of growth and into reliability.
Healthcare stocks delivered an equally striking result, with the MSCI global healthcare index rising 9.8 per cent, the second-largest monthly advance of the century so far.
The only comparable period was April 2020, when the onset of the Covid pandemic sent defensive assets surging by 12.4 per cent as investors sought shelter from the unknown.
Set against those numbers, the collapse in technology has been severe, with the MSCI global technology index shedding more than 13 per cent since the beginning of October alone.
Analysts at Schroders pointed to a fundamental shift in how investors are viewing the sector’s long-term prospects, noting that “investors grew increasingly sceptical of technology sector valuations and questioned the long-term funding plans for the massive AI build-out.”
A political shock amplified the sell-off, with the Democrats securing a decisive midterm victory last week, winning key battleground states to claim both the Senate and the House of Representatives.
Markets interpreted that result as a potential brake on data centre expansion, triggering a sharp AI-related sell-off that accelerated an already troubled period for technology equities.
European markets, carrying far lighter technology exposure than their American counterparts, have emerged as notable beneficiaries of the rotation, with Germany’s DAX rising 5.1 per cent and the Swiss Market Index surging 8.4 per cent, powered by pharmaceutical giants Roche and Novartis.
London’s FTSE 100 added a more modest 1.5 per cent, while consumer brands including Diageo, up 13 per cent, and Reckitt Benckiser, which owns Dettol and has gained 8.1 per cent, demonstrated renewed investor appetite for tangible, everyday businesses.
Unilever, the maker of Dove and Vaseline, posted a 4.1 per cent rise after a prolonged period of pressure from elevated shipping and energy costs linked to the Middle East conflict.
Across the Atlantic, US-listed staples names also rallied strongly, with Walmart climbing more than 15 per cent since the Nasdaq Composite peaked on 6 October and Coca-Cola advancing more than 10 per cent over the same stretch.
Citi’s Beata Manthey, head of European equity strategy at the bank, was blunt in her assessment, writing that “earning revisions have decelerated and AI sentiment has plunged” as she announced downgrades across a range of US and global technology stocks.
Manthey simultaneously raised her recommendation on European equities, excluding the UK, citing the region’s comparatively low exposure to the technology sector as a structural advantage in the current environment.
Citi described the broader rotation as “violent,” though analysts at the bank suggested the outperformance of defensive sectors could extend further into more cyclical areas of the market during the coming year.
Asset managers including Pictet and BlackRock have also been trimming their US exposure, reinforcing the sense that the repositioning is broad-based rather than a short-term tactical adjustment by a minority of funds.
Kent Hargis, chief investment officer of strategic core equities at Alliance Bernstein, urged a measured approach, saying investors should weigh “quality companies with stable businesses that trade at attractive prices,” which he argued “have historically held up well in the conditions now taking shape, and offer an attractive risk/reward profile for the market challenges ahead.”