We summarise commentary by industry experts on the recent market movements.
Important to remember
It was only a matter of time before this kind of correction happened. Financial markets have been unusually quiet for too long, and that was never going to last. What we are seeing now is profit-taking driven by extended valuations and concerns about higher inflation in the US and potentially elsewhere.
Where and when will the selloff stop?
No one should profess to have the precise answer! Some investors have become over-extended (especially in ‘volatility’ products) and there may be more forced selling before fundamentals will matter again. Investors should be reassured in coming weeks by the strength of company profits, and the dividends & share buybacks which high levels of company cash allow. Inflation is likely to edge higher this year but not surge dramatically.
If investors can become comfortable with this outlook that should be enough to stabilise markets and enable a recovery.
Source: Andrew Milligan, Standard Aberdeen