A number of factors have contributed to a recent “sell-off” within the equities market, according to an expert.

Toby Vaughan, a member of the F&C; Investments strategy team, said that the equity market is no longer being supported by the US Federal Reserve’s “monetary easing bias”, while conditions within the credit and asset security markets appear to have worsened.

Limited liquidity within certain markets and concerns over the impact of the current financial crisis have prompted fears that the US could be heading for a recession and equities could soon be experiencing a bear market, he claimed.

Mr Vaughan said that conditions indicate the end of a bull market, with a slowdown in earnings growth, weakening credit and growing concerns about a recession.

“Despite such concerns, equity markets can still make gains, particularly if central banks enter a phase of monetary easing through interest rate cuts,” he commented.

However, investors should expect periods of “volatility” and corrections to occur within the market, he advised.

In related news, New Star recently reported that 70 per cent of “sophisticated” investors predict that emerging markets such as China and India are likely to offer more substantial returns than more developed sectors.

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