Not a correction, not a bear market…When the Dow Jones, S&P, and NASDAQ were purring along on an upward climb from July of 2006 through February of 2007 the market was reacting to a positive set of circumstances, led by high corporate earnings.
The fact that the markets have fallen and become more volatile since the end of February, is reflective of input that has created some profit taking and increased the level of short selling.
1] The rise of interest rates, although small by our standards, by the Bank of Japan, has created a less complacent atmosphere for those financial institutions who are active in the carry trade structure, borrowing from low interest rate countries and investing in high interest rate countries. 2] The sub-prime mortgage market is feeling the effects of the slowdown in housing. 3] The prospect for the economy slowing and with it corporate profits.
So now there is some element of uncertainty in the market. Not a bear market or a correction, but only a market whose participants will pull the trigger a little quicker than before.