Craigs Investment Partners broker Chris Timms said yesterday the bout of market weakness that had been expected for a few months had arrived.
Most equity markets had fallen between 5% and 10% since the highs reached in May.
''We have also seen significant moves in interest rates as well as currencies.''
The yield on a 10-year US Treasury bond had risen substantially over recent days and was trading yesterday at 2.42%, having traded as low as 1.63% in early May, he said.
The US dollar had rebounded strongly against most currencies. The New Zealand and Australian currencies had fallen by 10.4% and 13% respectively, against the greenback in recent weeks.
Aside from the fact that equity markets were looking stretched after a very strong run, a major catalyst for the volatility had been speculation the US central bank would soon being tapering its quantitative easing programme - the printing of money.
The Fed had printed ''significant volumes'' for a long time hoping to boost the economic recovery and ultimately improve the labour market, Mr Timms said.
Since last year, the Fed had printed $US85 billion a month ($NZ109 billion), using that money to buy Treasury bonds in the market. The policy had kept interest rates low, encouraging borrowing and investments, as well as supporting property and share prices.
In recent months, there had been signs of a strengthening US economy emerging. A resurgent housing market continued to lead the way, while other early indicators, such as consumer confidence and a more stable employment picture, were beginning to follow.
''This has led to speculation the US economy is showing enough self-sustained growth for the Fed to begin to pare back its QE support over coming months,'' Mr Timms said.
However, he warned that although the Fed had admitted it could taper later this year, it would only do so if the economic data warranted the move. It could also increase QE, if necessary.
If the US economy continued to improve, the next move would be an increase in interest rates from their near-zero levels,possibly in 2015.
''There remains a risk to this view.
''We have already seen one or two false starts from the US economy over the past three years, where a burst of positive data has proved to be short-lived.
''While recent optimism appears more genuine, it would only take a few disappointing pieces of information - particularly for employment - for recent moves to reverse.''
In the short term, Craigs was predicting more market volatility, Mr Timms said.
