After posting gains in nine out of the last 10 trading days, leading to an all-time high, a sharp drop in technology stocks led to a broad market selloff, sending the S&P 500 down over 3.5%. While there were not any specific catalysts for the sharp drop, we can point to two likely causes that led to investor jitters: an overbought stock market and growing concerns about the global economic recovery. As we have noted numerous times, optimism about the economic recovery and the strong momentum in the stock market had stretched valuations to levels not seen since the early 2000s. With valuations so high, equities are pricing in near perfection.
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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
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