New York: The market, it’s said, finds a way to maximise the pain. For everyone who fell in love with cyclical shares just in time for them to drop the most in two months this week, it’s an adage they can relate to.

Lurches in retail, technology and commodity stocks are spelling trouble for newly christened macro bulls, sending an exchange-traded fund that tracks high-volatility shares to its first decline since October. Back on top are health care, utilities and real estate, defensive sectors that dominated all year.

While none of the moves were huge, they stung fund managers who hoped economically sensitive industries were tickets to redemption after 71 per cent of them trailed benchmarks through October. Betting on volatile shares has been a hallmark of late-season recovery strategies that looked like a sure thing as the S&P 500 rallied. This week was a reminder they’re not.

“Throw the rules out and chase the returns — that’s where investors were heading,” said Jennifer Ellison, principal at San Francisco-based BOS. “We pushed hard against it.”

Among struggling equity managers, a spate of improving economic reports opened their eyes to the possibility a pivot point was at hand for cyclicals. The veil lifted, mutual funds dutifully raised overweight exposure to the highest level in two years, according to Goldman Sachs, increasing allocations toward industrials and semiconductors and away from utilities and staples.

So far in November, industrial, technology, and materials exchange-traded funds have taken in more cash than any other sector, with each on track for the highest monthly flows of 2019. Combined, those three industries have absorbed roughly $4.7 billion this month, more than the other eight sectors combined, data compiled by Bloomberg Intelligence show.

But that trade is being tested, and an Invesco high-beta ETF that’s stuffed with tech, energy, and consumer discretionary stocks fell for the first time in five weeks.

“We’ve kind of flip-flopped from a growth expectations standpoint,” said Keith Buchanan, portfolio manager for Globalt Investments in Atlanta. Investors have gone from “’Oh wait, we see the light at the end of the tunnel,’ to now in the past week and a half it’s been, ‘Oh, well things aren’t as good as we thought.’ Expectations are extremely volatile,” he said.

At UBS, Francois Trahan warned that an uptick in US manufacturing coupled with the Federal Reserve’s interest rate cuts created an illusion that the slowdown is over. But interest rates argue the downtrend in leading economic indicators like the ISM New Orders Index isn’t finished, he said.

“This is just another false start,” he wrote in a note this week.

Strategists at Wells Fargo Securities recommend investors start selling cyclically exposed stocks. Those shares have beaten most expectations this year and it makes sense to realise gains given that a trade deal between the US and China could be pushed to next year or could fall apart, said Chris Harvey, a senior analyst at the bank.

Of particular concern to bulls are fissures forming on the consumer front, whose strength has been the bulwark of the economy. Weak earnings from Home Depot Inc. and Kohl’s Corp. this week sparked fresh doubts about whether American consumers will keep spending through the holidays. Both cut their annual forecasts for the second time this year.

The gap between US two- and 10-year Treasury yields, viewed by many as a proxy for future growth, is also starting to seed anxiety. It recorded eight straight days of narrowing as trade negotiations between the US and China showed few signs of resolution.

“Recently with this fatigue, with it dragging on and on and on and on and not getting across the finish line, I think that investors now are starting to worry again that we may not see that phase one in 2019,” Chris Gaffney, president of world markets at TIAA, said by phone.

To be sure, not everything is falling apart. A US factory index, for instance, rose to a seven-month high in November. A handful of retailers, including Target Corp., posted stronger-than-expected earnings results. Sentiment among American consumers also gained in mid-November as the economic outlook improved.

“We’re a little bit less concerned about the imminent recession risk,” Josh Kutin, head of asset allocation for North America at Columbia Threadneedle Investments, said in an interview at Bloomberg’s New York headquarters. “We can talk ourselves into a cautious stance just based on all these different risks that are out there right now, but it seems that we continue to be rewarded every time we keep some of our cards on the table.”