The recent sell-off may or may not be a sign that the market bubble is bursting, especially in technology shares and possible over-valued stocks.
But the falls so far need to be put in the context of some substantial gains since markets reached their lows following the financial crisis. Jim Reid at Deutsche Bank has crunched the numbers. He said:
If we define the beginning of the bull market as having started on 9 March 2009 when stocks hit their financial crisis-lows, the Nasdaq technology and biotech indices have gained 254% and 281% respectively. The S&P 500 homebuilders index has gained 256% over the same period. For comparison, the S&P 500 has gained "only" 177%.
Tech, biotech and homebuilders are now down 5%, 19% and 12% from their year to date peaks. This compares with 3.1% retracement in the S&P 500 from the record highs posted in early April this year. So it does seems that sectors that have benefited the most from easy policy are those that are selling off the most right now.
As for the FTSE 100, it has jumped 85% since the 3542 level on 9 March 2009, even after its recent falls.
