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Living up to its reputation as the most temperamental month of the year for stock markets, September has brought with it mood swings of two distinct varieties.

It started out with a sharp reversal in the IT sector, fuelled by concerns that the big U.S. tech and internet stocks had run up too far, too fast. Many analysts have framed this episode in constructive terms, as a healthy breather within a continuing upward trend, or a “bull market correction.”

More recently, the volatility has homed in on old-economy sectors and cyclical stocks, a sure sign of growing concern about the shape of the economic recovery amid a resurgence of COVID-19 infections in many parts of the world.

It’s a bigger stretch to view this kind of a dip in a positive light, said Brian Madden, a portfolio manager at Goodreid Investment Counsel in Toronto.

“When you see energy and chemicals and transports down simultaneously, the inference is that global demand is weakening,” Mr. Madden said. “There’s not a lot of bullish read-through from that.”

The silver lining, however, is that the two patterns have not yet converged in an indiscriminate sell-off of the sort that crushed global stock markets in the winter.

It’s been more of a tug-of-war between competing sets of fears.

In early September, for example, the tech-heavy Nasdaq Composite Index experienced a 10-per-cent correction over just three days.

Coming on the heels of a bewildering 75-per-cent ascent starting in late March, this mini tech wreck was largely seen as a function of the sector’s strength.

“No matter how you slice it, the Nasdaq 100 and, more generally-speaking, tech equities were getting pricey,” Hugo Ste-Marie, a strategist at Scotia Capital, wrote in a recent report. “High valuation and overheating conditions often lead to sharp reversals.”

On days when tech drags the rest of the market down, the damage in sectors more closely tied to the real economy tends to be limited.

The Dow Jones Industrial Average, which has a more cyclical orientation than the Nasdaq, experienced only about half of the losses of its high-tech counterpart over those three trading sessions.

Meanwhile, the S&P/TSX Composite Index, which is heavily weighted in resources and financial stocks, and is deeply attuned to the fortunes of the global economy, posted just one-third of the Nasdaq’s drop.

Then, macroeconomic and geopolitical concerns crept back into the consensus mindset.

The resurgence of the novel coronavirus in Europe, the United States and Canada has reignited fears of a severe second wave of the pandemic through the fall. On Tuesday, British Prime Minister Boris Johnson introduced a bundle of restrictions on social gatherings, saying the country faced a “perilous turning point.”

The threat of renewed lockdowns has been amplified in stock markets by continuing trade tensions between the U.S. and China, a political stalemate over another major round of U.S. fiscal stimulus and a chaotic U.S. presidential election campaign.

This convergence of fundamental risks culminated in Monday’s drubbing of cyclical stocks.

Oil and gas names, travel and hospitality stocks, and bricks-and-mortar retailers were among the biggest losers, which was reminiscent of the lockdown trade that characterized markets in the winter.

On the winning side, the same work-from-home, pandemic-resistant tech names that soared through the pandemic’s first wave are acting as stabilizers this time around. Over the past three trading days, Zoom Video Communications Inc., for example, has gained 19 per cent. Canadian-based e-commerce powerhouse Shopify Inc. has gained 11 per cent over the same time.

This back-and-forth between cyclical and growth stocks over the past few weeks can persist in the absence of a major escalation in either the global pandemic or U.S. political turmoil, as in the case of a disputed election result in November, Mr. Mann said.

“If you get into either of those two kinds of scenarios, I don’t think you can rule out the possibility of baby-and-bathwater style selloffs.”

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