Global markets have seen broad selling pressure over the past few weeks with weakness concentrated in foreign equity markets, mid and small caps, and market sectors sensitive to the overall level of global economic activity, such as energy and materials. While the S&P 500, which is comprised of large U.S. companies, began to come under pressure around September 19^th, it was one of the last indices to decline as many areas had been exhibiting weakness in the months prior. The table (right) illustrates how far various asset classes and sectors of the domestic market have fallen from their 52-week highs heading into this week.

Some of the key triggers for recent weakness have been softer than expected global growth conditions and deflation risks, which combined have helped push government bond yields lower worldwide. The dramatic fall in bond yields is an unambiguous signal for policymakers to stimulate business activity, particularly overseas.

The correction in asset prices does not come with much of a surprise. We have been overdue for a setback given the extent of the markets recent rise, higher valuations, abnormally low volatility, and very optimistic sentiment. However, low bond yields and falling commodity prices should support economic growth and equity prices, warranting a patient and opportunistic view toward the current sell-off.