Global markets are entering a more selective phase as rising bond yields, sticky inflation concerns, and changing sector leadership reshape investor behavior, according to strategist Matt Orton from Raymond James Investment in an interview with ET Now. While the AI-driven rally continues to dominate returns, signs of rotation are gradually emerging across sectors and regions. Orton noted that while AI has driven most of the performance so far, 'now we are seeing some rotation,' with early signs of movement in Asian markets suggesting a broader shift in market dynamics. Investors should remain selective but may still 'use downside opportunistically' in areas where earnings quality and structural growth remain intact, particularly in parts of technology and other growth-oriented sectors.
Regarding the technology sector, Orton described recent weakness as a healthy and orderly correction rather than a breakdown in trend. He said the recent selloff has 'not been disorderly' and is better understood as a rotation, where semiconductors and AI-capex beneficiaries have come under pressure while more cyclical areas have gained traction. Orton expects capital to eventually return to areas with visible long-term growth, especially within technology, communication services, and industrials once broader clarity emerges. 'Money will return to visible long-term growth sectors,' he emphasized, noting that investors should focus on companies with strong fundamentals and structural growth potential.
On fixed income markets, Orton emphasized that rising long-term yields have become the dominant force shaping global risk sentiment. He said 'long-term yields are driving markets' and warned that bonds are now behaving more like risk assets than traditional hedges. Orton also pointed out that the historical relationship between stocks and bonds is changing, with both asset classes increasingly moving in tandem, requiring investors to diversify not just across asset classes but also within equities through sectors, industries, and geographies. This shift has important implications for portfolio construction, as diversification within equities becomes equally important as diversification across asset classes.
On monetary policy expectations, Orton pushed back against the idea of near-term rate cuts, arguing that inflation trends do not support easing at this stage. He said 'rate cuts are largely off the table right now,' and added that current inflation data does not justify policy loosening. While acknowledging that markets often shift expectations quickly, he noted that central bank decisions remain a key uncertainty and described policy risk as a major wildcard for global markets going forward. Regarding geopolitical developments, Orton noted that expectations around geopolitical developments, including Iran–US relations, remain uncertain and markets are unlikely to respond meaningfully without concrete progress. 'We are not close to a resolution,' he emphasized, adding that it is difficult for investors to depend on announcements without real evidence of change, and that markets will need 'proof of direction' before reacting in a sustained manner.
