Traders are rapidly unwinding their wagers on global reflation as Wall Street frets over protracted post-election wrangling.

With the prospect of a divided Congress making it harder to pass fresh stimulus, investing strategies acutely sensitive to the economic cycle are getting punished. Among the risk-off moves: Value stocks are underperforming, inflation expectations are dropping and defensive tech stocks are reclaiming market leadership.

In the run-up to Tuesday, reflation trades had been all the rage as money managers looked forward to massive new government spending to battle the pandemic with the White House and Congress both under Democratic control.

“Early price action is indeed showing a sharp fall in U.S. yields and an unwind of the ‘blue wave’ trade,” Barclays Plc strategists led by Emmanuel Cau wrote in a note. “The recent rotation, which saw bond yields rising and value outperforming along with EM, could be halted for now.”

The reversal is evident in U.S. index futures. The tech-heavy Nasdaq 100 is up 2.8% as of 4:29 a.m. in New York, while the Dow Jones Industrial Average is up 0.4%. In Europe, MSCI indexes show value stocks trailing growth by 1.1 percentage point, with banks slumping the most among sectors.

In pre-market trading, an exchange traded fund that is a three-times leveraged bearish bet against small caps, ticker TZA, surged 4.3%. The biggest small-cap product (IWM) dropped 1.4%.

The very fact that U.S. stocks look set to beat both Europe and emerging markets on Wednesday is also an indication of risk aversion. The American market is made up of more growth stocks and generally considered less risky.

“We can expect investors to turn more defensive and some of those ‘blue sweep’ trades that we have seen arising since the summer and even more so over the last few days are likely to unravel,” Fabiana Fedeli, global head of fundamental equities at Robeco, wrote in a note, referring to bets on emerging markets, renewable stocks and a rotation from Big Tech into cyclical shares.

“This, however, could be a very short-term trade and just in place until we have some clarity on the win,” she added.

In the fixed-income market, the gap between five- and 30-year Treasury yields narrowed to 123 basis points, compared with 128 basis points on Wednesday. Inflation swaps dropped three basis points. Five-year breakeven rates fell two basis points.

Some investors are still hopeful larger fiscal spending is on its way, regardless of the election outcome.

“The probability of gridlock has risen,” Nathan Sheets, chief economist at PGIM Fixed Income, wrote in a note. “But sizable stimulus – with funding for the unemployed, small business, and state and local governments – is still likely after the election. There is broad-based political support for such measures.”