It was difficult to say when the current period of
sharemarket volatility would end or how much further markets
would fall before finding stability, Craigs Investment Partners
broker Chris Timms said yesterday.
The Standard and Poor's 500 was 4% below its peak, so the
current bout of volatility barely registered as a correction
''Depending on who you ask, a 'correction' is generally
considered to be a downward move of about 10%. The current
weakness could easily continue towards that sort of level,
especially when you consider the US market rallied more than
30% last year - its best year since 1997 - while many other
markets also broke records.
''It could be argued we were well overdue for a decent
pullback,'' Mr Timms said.
A 10% fall in the S&P from its peak on April 2, when it
hit 1890 points, would see it fall to 1700 points. That would
put it on a 2014 calendar-year price-earnings ratio of 14.4
times, based on current earnings estimates.
It was hard to imagine the market reaching that level without
some ''decent'' buying interest emerging, so advice now would
be not to panic, Mr Timms said.
Unlike in 2008, global economic growth was gaining momentum,
led by the United States.
None of the major economies were showing signs of heading
back towards recession.
Earnings were also growing, albeit slowly in places, and the
only real concern of late had been valuations.
In all likelihood, markets would go lower as sentiment swung
back towards the cautious side of the scales.
They would probably stop short of correcting any more than
10% before stabilising, he said.
ASB chief economist Nick Tuffley said the technology-rich
Nasdaq index, in the US, had eased 9% from its 2014 highs.
Previously high-performing technology, biotechnology and
pharmaceutical stocks in the US had weakened.
The US reporting season was now under way and the flow of
earnings results would be important for stocks and broader
market sentiment over the coming week.
US Treasury yields had fallen as shares had softened and the
US government 10-year bond yield was back near the lows of
The US dollar was also at the bottom of its recent range, Mr