Dizzying rotations and inflation rapids: Mike Dolan

Dizzying rotations and inflation rapids: Mike Dolan

Monday's price action was extraordinary. The tech-heavy Nasdaq ended down 2.4% while the Dow Jones Industrial Average gained almost 1%. Euro zone stocks ended 2.5% higher, but emerging market equities skidded 2.3%.Both the Nasdaq and MSCI's main emerging market stock index recorded technical 10% corrections from February peaks.The picture was more confusing as emerging markets had been seen in the 'value' camp until recently - but only as long as U.S. bond yields and the dollar kept falling.As those two pivotal bellwethers have backed up sharply, emerging clouds have gathered again and the sector now apes Big Tech instead.Whether all this turns out to be a few days of scattergun trading or endures now hinges on a withering few months of heavily distorted inflation statistics - the bond market pricing around them and central bank reaction function as they emerge.As has been the case for most of the pandemic shock, 'duration', or interest rate sensitivity, is driving everything - stocks, bonds, regions and commodities.The 'long duration' quality of tech and 'growth' stocks, for example, stems from how current valuations of firms with expected cashflows far into the future are disproportionately affected by shifts in the discount rates used - typically