selloffs

Selloffs are rapid, broad or concentrated declines in asset prices over a short period, often accompanied by rising volatility and heavy selling. They can affect equities, fixed income, commodities, and currencies, and may occur across markets or in specific sectors or assets.

Selloffs arise from a combination of factors: negative earnings or macro data, geopolitical shocks, shifts in risk appetite, liquidity constraints, margin calls, and algorithmic trading triggers. Once prices start to fall, feedback loops—such as stop-loss orders, portfolio rebalancing, and deleveraging—can amplify declines and extend the move.

Indicators include sharp intraday drops, high trading volume, widening bid-ask spreads, and rising volatility measures (like VIX). Selloffs can reduce liquidity and disrupt price discovery, but they can also create selective buying opportunities for patient investors.

Historical examples include the Black Monday crash of 1987, the financial crisis selloffs in 2008-09, the sharp market decline in March 2020 during the COVID-19 pandemic, the 2010 Flash Crash, and the mid-2015 to early-2016 Chinese equity rout. Market responses typically involve trading halts or circuit breakers, and policy actions such as liquidity provision by central banks and clear communication to stabilize sentiment.