It’s official – ASX 200 sinks into correction territory

A market correction is referred to as any pullback exceeding 10%.

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The S&P/ASX 200 Index (ASX: XJO) fell hard on Thursday.

After posting gains of more than 1% in the first hour of trading, it was all downhill from there.

At time of writing on Thursday afternoon, the ASX 200 was down 1.59% since the market open.

That brought the index down 10.2% since trading for the year started from the opening bell on 4 January.

And that, unfortunately, means we’ve now officially entered correction territory, which broadly relates to any pullback of more than 10%.

Why is the ASX 200 under pressure?

The ASX 200 has been under pressure in the new year as investors have begun to reposition their holdings with an eye on rising interest rates.

Once expected to remain at rock bottom levels through at least 2023, the US Federal Reserve and other leading central banks around the world are now likely to bring forward interest rate hikes into the next few months. Not to mention scaling back the massive bond buying (QE) programs put in place following the unset of the global pandemic.

This new hawkish turn has not only hit the ASX 200. It’s also seen US indices fall sharply, and sent the tech heavy Nasdaq into correction territory last week.

While the Reserve Bank of Australia hasn’t indicated it will follow suit, many analysts predict the RBA won’t be able to hold off from its own monetary tightening sooner rather than later.

Not all shares are sinking

Despite the broad selloff, it’s important to remember that not all ASX 200 shares are selling off today.

Oil and gas explorer, Beach Energy Ltd (ASX: BPT), for example, is up 8% at time of writing.

Australia energy supplier AusNet Services Ltd (ASX: AST) is well into the green too, up 4%.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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