A dramatic sell-off in US stock markets has spread across the world, triggered by a sharp rise in US bond yields after data last week showed wages increasing at the fastest pace since 2009.
That, in turn, raised the prospect of higher inflation and, as a result, the possibility of higher interest rates.
But strategists and analysts don’t appear to be in panic mode.
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Here’s a look at how some of them are reacting.
Hussein Sayed, chief market strategist at FXTM
“We have been anticipating a correction for a long time now, but when markets become over-confident, corrections also become steeper. It’s hard to tell how far markets may decline, but given that economic fundamentals remain strong, I think investors will start buying the dips sooner than later.”
Neil Wilson, senior market analyst at ETX Capital
“We are not there yet but the chances of this sell-off turning into full blown bear market have increased dramatically. If investors look at underlying earnings growth and the fundamentals of the global economy, there is reason for optimism. However once this kind of stampede starts it’s hard to stop.”
Holger Schmieding and Kallum Pickering, economists at Berenberg
“Markets have enjoyed a sweet spot in the past year or so. Strengthening economic data that did not quite prompt central banks into putting on the brakes encouraged an equities rally while keeping sovereign bond yields lower than one would normally expect given the market’s expectation for GDP growth and inflation.
“The rise in bond yields reflects a return to normal for economic growth and inflation. And the softer equity markets, which for now reflects no more than a correction of the little excess on the upside in recent months, need not change the economic or central banking calculus much.”
James Bateman, chief investment officer for multi-asset at Fidelity International
Let’s be clear - in the long span of financial history, this is not news. Yet in a world where the concept of a “correction” almost feels alien and where equities felt like an unstoppable one-way bet for a while, the normality of a setback can feel more painful.”
Naeem Aslam, chief market analyst at ThinkMarkets
“The sell-off in the market is nothing more than just long overdue market correction. As there is no fundamental situation which has made matters worse. The earnings season has told us one story that corporate profits are strong and the consumer confidence shows that investors are comfortable with their spending.”
