selloff

Selloff is a term used in financial markets to describe a rapid and broad decline in the prices of securities within a market or asset class, driven by increased selling pressure. Unlike a market crash, a selloff is usually driven by panic or negative news but can be shorter in duration and less extreme, though it can still be sharp and broad. Selloffs can affect equities, bonds, commodities, and currencies, and may occur across regions or globally.

Causes include disappointing earnings, poor macro data, shifts in monetary or fiscal policy, geopolitical developments, or a realization of overvaluation. Psychological factors, liquidity constraints, and margin calls can amplify declines, and algorithmic trading can contribute to rapid price moves. Market breadth and liquidity conditions influence how broadly a selloff spreads and how long it lasts.

During a selloff, prices fall as sellers outnumber buyers, spreads widen, and volatility often increases. Investors may reduce positions, rebalance risk, or hedge, while long-term investors may view declines as buying opportunities. Regulators may intervene with circuit breakers or trading halts to prevent disorderly markets.

Notable episodes include declines during the 2000–2002 dot-com bust, the 2008 financial crisis, the 2010 Flash Crash, and the sharp market drop in March 2020 during the onset of the COVID-19 pandemic. Understanding selloffs involves market psychology, liquidity dynamics, and macroeconomic context.