“Tell me what’s going on,” sang Marvin Gaye. Investors might well ask the same question. Part of the answer is that market turmoil is consistent with risk reduction after a long bull run.

Markets that have risen furthest have been hit hardest. In developed markets, European equities have fared worse than the US, reflecting their bigger rally since the 2003 trough and lower levels of market liquidity. Emerging markets have been at the forefront of the sell-off – which has affected both countries with current account problems, such as Turkey, and those without, such as Brazil. This suggests that investors are unwinding popular trades – differentiation on the basis of economic fundamentals will come later. Rising correlation between previously unrelated markets and derivatives activity may also have made the correction more severe.