It has been a testing few months for the world's stock markets. In fact, the quarter to the end of September has been their worst three-month performance in four years. Across the world, major stock markets were rumbled by political and economic turmoil from China to Greece. Between July and September, the FTSE 100 dropped 7% in value, the Dow by nearly 8%, the Nikkei by more than 14%, the Dax lost almost 12%, and the Shanghai Composite tumbled just short of 25%.
There were some gains made by stock markets in September's closing hours of trading. But Mike van Dulken, head of research at Accendo Markets, called it an "undeniably tumultuous quarter". Here is some of what has driven markets down in recent months.
China's 'Black Monday'
A stock market crash in China hit the country's many household investors, who had been encouraged by the government to invest in the red dragon's burgeoning markets. The bubble was fuelled by rampant speculation and debt-driven investments, which bloated stock prices to unsustainable levels before it went pop on China's "Black Monday" on 24 August. To stimulate the powerhouse Chinese economy, as markets crashed and its exports performance disappointed, the yuan was weakened heavily by the government. What's more, growth has slowed markedly in the Chinese economy – set to become the world's largest in a few years – and is expected to slow further. All of this hurt investor sentiment because a weaker China means a weaker global economy.
Are stocks overvalued?
There is a lingering suggestion that stocks are overvalued in the countries where enormous bond-buying QE (quantitative easing) programmes have been in place for several years. This is because investors have been driven away from government bonds and towards equities in search of higher yields. With interest rate rises from the Federal Reserve and the Bank of England getting closer each day, some may be checking out of the equities market and taking their gains just in case. What's more, the enormous value placed on tech firms relative to low, if any, earnings is also causing concern, with people saying this is a similar situation to the dotcom bubble in the early 2000s.
Commodity prices in decline
Oil, gas, copper, platinum, coffee, wheat – lots of commodities have seen sharp price falls recently. While some firms benefit from a lower cost of materials, such as manufacturers, and some of the largest companies in the world and those dominating major stock markets are reliant on high commodity prices, from mining to energy to agriculture. Those selling commodities are being hit hard and taking the markets down with them.
Emerging markets give 'reason to be concerned'
The International Monetary Fund has sounded the alarm about debt-laden emerging markets, raising the possibility of a mass default when interest rates begin to rise again. Emerging economies have loaded themselves with debt by borrowing at low cost in developed economies to fund investment and rapid growth at home. But Christine Lagarde, managing director of the IMF, said there is "reason to be concerned".
"The prospect of rising interest rates in the United States and China's slowdown are contributing to uncertainty and higher market volatility," she said in a Washington speech. "Despite progress in recent years, financial sector weaknesses remain in many countries, and financial risks are now elevated in emerging markets."
Another election in Greece
There was another election in troubled Greece, the second in less than a year, which polls suggested beforehand would be a close-run contest between the radical-left anti-austerity party Syriza and the centre-right New Democracy. Uncertainty over the fate of Greece has plagued European markets, though few took this election to be a risk to the recent hard-fought bailout agreement with its creditors. In the end, it wasn't as close as anticipated, and Syriza won the election fairly comfortably – although doubts linger about the party's commitment to the much-needed fiscal reforms the creditors have demanded in exchange for bailouts.
Is Abenomics failing?
The Chinese slowdown has rippled out to Japan, where business confidence dipped during the quarter. Now the Japanese economy looks to be on the brink of yet another recession, despite the much-vaunted "Abenomics" programme by prime minister Shinzo Abe, of ultra-loose monetary policy, public investment and liberalising economic reforms. Japan is the world's third largest economy.