In recent weeks most pundits have come to believe that perhaps the worst of the bear market was behind us. Investors who had bet on that prospect are nursing losses. Evidently it is still far too early to call. The markets remain firmly in the grip of the bear however much fundamentals may cry out for a different interpretation.
Turnover is low in equities and bond markets are driven by futures. Real investors seem to have taken out their deckchairs, content apparently to watch the action from the sidelines but take no part in it.
Markets yesterday seized on a number of excuses for the sell-off. The outcome of the European election results, though fully anticipated in the stock market, was received with horror. For the first time in 15 years Labour looks electable, and in the mean and horrible little world of stocks and shares that's a bad thing.
Furthermore, parties of government performed poorly throughout Europe with the notable exception of Germany. It would be all too easy for them to respond by throwing fiscal caution to the wind and indulging in vote catching tax cuts.
For the markets the situation in the US looks equally worrying. Concern about today's US consumer price index and remarks by Susan Phillips, a Fed governor, about the inflation outlook revived speculation of a midsummer increase in US rates.
Gilts lost 11 12 points and Footsie shed more than 45 points at one stage. An unexpectedly good set of producer price figures failed to help. On one measure, the rate of factory gate inflation is now at its lowest since November 1967. Instead, markets concentrated on the continued rise in raw material costs, driven by the surge in base metal prices.
In the short run it is hard to see why sentiment should change much. This is still an equity market driven more by interest rate concerns than earnings and growth. Further US tightening seems inevitable this summer. In Europe, too, the bottom of the interest rate cycle may be in sight.
Certainly in Britain the pace of expansion will have to moderate to lay to rest market suspicions about the Chancellor's anti-inflation resolve. There's not much chance of that with the Tories so split and down on their luck. It is still too early to be buying in the equity and bond markets.