Technology stocks are out of favor, while previously shunned bank shares are popular again, as a persistent jump in bond yields is turning markets upside down this year.

The ongoing rout in tech stocks -- a no-brainer pick for more than a decade -- looks to be more than a short-term pullback: Bank of America Corp.’s January global fund manager survey showed that net allocation to the sector fell 20 per cent month-over-month to 1 per cent, the lowest since 2008. At the same time, overweight positions on bank stocks rose to 41 per cent among BofA’s clients, closing in on a record set in October 2017.

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“Central bank tightening remains the #1 risk to markets in 2022,” strategists led by Michael Hartnett wrote in the survey. That’s bad news for expensive technology stocks that are valued on future growth expectations and good news for bank stocks, which have suffered for most of the past decade amid ultra-low or negative yields.

The stampede out of tech continued on Tuesday, with the Nasdaq 100 falling as much as 2 per cent while yields on U.S. 10-year Treasury notes hit a two-year high of 1.85 per cent. The tech-heavy Nasdaq is now down 6.2 per cent this year, while the KBW Bank Index of U.S. lenders has jumped 10 per cent.

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BofA’s survey, showing the newfound popularity of banks, was conducted between January 7 and 13 and comprised responses from 329 fund managers with US$1.1 trillion in assets under management.

A separate Deutsche Bank AG survey published today showed that a majority of more than 500 respondents think U.S. tech shares are in a bubble. In the survey of market watchers conducted last week, 49 per cent agreed the sector is in bubble territory, while 39 per cent disagreed and the other 12 per cent said they didn’t know.

Still, not all tech stocks are equal, according to Goldman Sachs Group Inc. The market is differentiating between “defensive, strong balance sheets and cash generative technology on the one hand, and unprofitable very long duration technology on the other,” strategist Peter Oppenheimer wrote in a note today. “The very long duration unprofitable companies had arguably reached ‘bubble’ territory and have now adjusted most aggressively.”

From here, the direction of travel in markets may be partly dependent on the earnings season that kicked off last week. U.S. reports, which include Netflix Inc., Bank of America and Goldman Sachs Group Inc. this week, “could help tip the scales in either a positive or negative direction,” according to AJ Bell investment director Russ Mould.