The big question is: are the bears now right at last? Certainly the sell-off of the past few weeks has been severe enough to test the nerves of even the most battle-hardened investor. The danger is that this morphs into something worse – from the current correction to bear market – as those of a less robust constitution decide that after a good run it’s worth banking some profits. As legendary investor Bernard Baruch aptly put it, “nobody ever lost money taking a profit”.
There is some evidence that this may be happening. Among this week’s biggest equity market fallers are investment trusts exposed to the technology stocks that have led the sell-off in the US – Scottish Mortgage being a prime example. Such has been the trust’s popularity – fuelled by the belief in the unstoppable march of the technology companies in which it invests – that for much of this year it has traded at a noteworthy premium to net asset value (NAV), peaking at 4.5 per cent in June. That has now shifted definitively towards a discount – at 418p shares in the trust are trading at a six-month low and well below yesterday’s closing NAV of 444p. That shift is a clear sign that sentiment is wavering.