(Bloomberg) -- A selloff in hyper-expensive tech stocks. Travails in crypto land. Snowballing weakness in small caps. And now a runup in the cost of equity insurance.

Despite a solid markets close on Wednesday, there were other signs this week that showed this year’s ardor for risky assets has hit a rough patch. Concern the Federal Reserve is stepping away from its nearly two-year campaign to supercharge the economy is sowing caution in speculators’ hearts.

The latest exhibit is the Cboe Volatility Index, which has gained 2 points since Monday of last week, a period in which the S&P 500 is little changed. Demand for protective options is suddenly growing as previously torrid corners of the equity market cool off.

Many of the shifts were subtle in a market where major benchmarks have held up, but could speak to a waning of gambler spirits. Bearish options are on the rise, a departure from earlier this year when traders rushed to calls for quick profits from share gains. Also expanding is the list of stocks hitting new lows. 

“We have seen risk being taken off the table this week,” Fiona Cincotta, senior financial markets analyst at City Index, said on Bloomberg’s “QuickTake Stock” streaming program. “There are a lot of headwinds, there’s a lot the market’s trying to grapple with at the moment.”

Tech companies, particularly those with super-high valuations, lost big after the re-appointment of Jerome Powell as the head of the Federal Reserve prompted traders to pull forward rate-hike expectations for next year. Once viewed as a havens during the pandemic, internet and software shares have become the market’s pressure point as the economy reopens, spurring angst over inflation. 

On Wednesday, the Nasdaq 100 closed higher for the first time this week. The tech-heavy index has lost 1.2% since Friday and is on pace for its worst week since the start of October. Non-profitable tech firms are faring even worse, down 4.1%. 

“The risk is that policy is going to turn from being very accommodative, to being less accommodative, with maybe potentially even tighter monetary policy,” said Anastasia Amoroso, chief investment strategist at iCapital Network. “That should put a cap on valuations, and that’s one of the reasons why we don’t see the same style returns in 2022.”

Of course, obituaries have been written for speculative assets virtually weekly since the post-pandemic rebound. None has held up, and indeed betting against stocks and crypto has been an incredibly costly mistake. Amid rounds of policy support and robust corporate earnings, short sellers have been driven almost into extinction after a doubling in the S&P 500 over 20 months.

“The generally constructive backdrop supports equity performance,” said Dennis DeBusschere, founder of 22V Research. “While credit remains tight, internal rotations, like the drop in unprofitable companies, shouldn’t lead to a market-wide correction.”

But that hasn’t stopped traders from readjusting their risk appetites. As Treasury yields revived their ascent, that struck fear into some of the market’s most speculative fringes.

A Goldman Sachs Group Inc. basket of expensive software stocks slipped for a fifth straight day through Tuesday, the longest slide since May. Down 7% in November, the group is heading for its worst month since March.

Meanwhile, the Renaissance IPO ETF (ticker IPO), tracking recent initial offerings -- with many having yet to earn money -- has tumbled more than 7%, on course for its biggest monthly decline since the pandemic bottom in March 2020.

In the options market, traders are betting on turbulence despite the persistent calm in the S&P 500. As money found their way into economically sensitive companies like financials and energy, the equity gauge has managed to mostly stay within 1% of 4,700 after hitting the milestone earlier this month for the first time ever. 

Over the same stretch, however, the cost of S&P 500 options increased, a sign of growing anxiety that the peace may not last. The VIX has risen to 3.1 times the equity benchmark’s 20-day realized volatility. That’s near the widest premium in four years.

From established retailers to newly listed tech startups, single-stock blowouts are happening at a more frequent rate than usual. Amid the burst came an increased interest in bearish options. The Cboe put-to-call ratio that tracks the volume of options tied to individual companies, jumped to a one-month high.

In another sign of waning risk appetite, small-caps haven’t kept up in the latest round of the reflation trade. The Russell 2000 Index is set to drop for a third straight week.

The underperformance reflects several issues, including the misconception that tinier companies could be hurt by rising prices, according to Richard Bernstein Advisors Deputy Chief Investment Officer Dan Suzuki. 

“Small caps are the antithesis of what everybody wants to own today,” he said.  Yes, there are some meme stocks in there, but the majority of small caps are stocks that people have either never heard of or that people do not view as beneficiaries of secular innovation.” 

And in the crypto space, which is perhaps the poster-child for speculative risk-taking, the biggest digital assets have shed billions in market value amid a swoon that’s seen Bitcoin drop more than 10% from records reached just two weeks ago. The Bloomberg Galaxy Crypto Index, which measures the performance of a handful of the largest tokens, has lost about 12% since the middle of the month. 

“I would argue that the recent drawdown in Bitcoin and the rest of the cryptocurrency ecosystem has been tied to the selloff in risky growth names,” Art Hogan, chief market strategist at National Securities, said by phone. “All of it coalesces around a risk-off environment.”

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