At the start of last week, the MSCI All Country World Index, which is a measure of world markets made up mainly of equities from developed countries, hit a record high of 349.06.
The previous record, 349.04, was set in March 2000. That was the same month as the tech bubble peaked. Maybe investors should have realised something bad was about to happen.
By the end of the week, global markets had slumped. The FTSE 100 fell 3%, shedding 129 points on Friday alone to end the week at 5,912. Japan's Nikkei 225 shed 3.2%, and in Europe, the Paris Cac 40 and German Dax both fell 3%.
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So what was behind this sudden loss of nerve? And is it downhill all the way from here?
The main culprit for last week's bout of nerves in global stock markets was uncertainty over the outlook for the US, and the dollar in particular. Global investors are worried because "the dollar is weak and inflationary pressures in the US are still not under control," Canada Life's Mark Bon told Bloomberg on Friday.
The greenback has slumped against the pound, euro and yen since last Monday, and sentiment shows little sign of improving.
Even news of a lower-than-expected US trade deficit couldn't help the dollar. The trade gap unexpectedly narrowed in March for the second month in a row, to a mere $62bn. That's the lowest gap since August 2005, with the fall driven by a new record for exports, and falling imports.
But as Paul Ashworth at Capital Economics points out, two-thirds of the improvement in the US trade deficit was "due to a surprising decline in the petroleum-related deficit. That decline should be reversed in April, and then some." Crude oil prices jumped 11.5% last month, which suggests that April's deficit will widen by $5bn.
At the same time, import prices rose by the most in seven months during April, up 2.1%. The threat of higher inflation pushed the yields on 10-year US Treasuries US government debt to their highest since May 2002. Meanwhile, the gap in the yield between standard 10-year Treasuries and inflation-proofed Treasury Inflation Protected Securities (TIPS) is at its widest since March last year. The gap widens as investors become increasingly concerned about inflation eroding the value of their investments.
And the bad news just kept on coming. US consumer sentiment this month has fallen to its lowest since October last year. That doesn't sound too dramatic - but bear in mind that September and October saw the aftermath of Hurricanes Katrina and Rita.
Excluding those two understandably miserable months, US consumers are now the most pessimistic they've been since 1993.
And it's little wonder. They are caught between the rock of a weakening currency and the hard place of rising interest rates.
The weak dollar means the cheap Chinese imports they enjoy so much will become less appealing. But higher interest rates are putting ever more pressure on the already fragile housing market, cutting off the supply of cheap credit they need to keep spending.
And to cap it all, the whole mess is being overseen by an inexperienced Federal Reserve chairman. If 'Maestro' Alan Greenspan was still in charge, markets might retain the confidence to cling to optimism a little longer - even though the overstretched state of the US economy is ultimately his fault (see How Alan Greenspan wrecked the US economy on the website for more).
But instead Ben Bernanke has already made a critical blunder. Last month he suggested in a report to the US Senate that interest rates would stay on hold. However he then told a prominent US journalist that markets had 'misunderstood' the comments, battering the dollar and confusing and unnerving investors.
As many economists have pointed out, Federal Reserve chairmen tend to face a serious economic crisis within a year to 18 months of taking the helm.
It looks like Ben Bernanke's troubles may be just beginning.
Turning to the stock markets in more detail
The FTSE 100 ended down 129 points at 5,912. Mining stocks were among the main fallers on concerns over global economic growth. Anglo American fell 5% to £24.25, while Rio Tinto dropped 4% to £31.82. For a full market report, see: London market close
Over in continental Europe, the Paris Cac 40 fell 112 points to 5,150, while the German Dax fell 138 to close at 5,916.
Across the Atlantic, US stocks slumped as rising bond yields exacerbated concerns about inflation. The blue-chip Dow Jones dived 119 points to 11,380, while the S&P 500 slid 14 to 1,292. Meanwhile, the tech-heavy Nasdaq fell 28 to 2,243.
In Asian markets this morning, the Nikkei 225 slid 114 points to 16,486 as the dollar continued to fall. Exporters were once again among the main casualties.
This morning, oil fell back in New York, to around $70.85 a barrel. Brent crude was also lower, trading at around $70.55.
Meanwhile, spot gold was trading at around $718 an ounce, after hitting a 26-year high of $730 on Friday.
And here in the UK, the FTSE 100 sell-off has continued this morning. The blue-chip index was down as much as 100 points in early trading as investors around the world took their cue from Friday's sell-off on Wall Street.
And our two recommended articles for today...
How fund managers are making the pensions crisis worse
- Fund managers like to run with the herd, even if the herd is rushing headlong over a cliff. The rush to match pension liabilities by buying ridiculously expensive government bonds only proves this, says fund group Bedlam Asset Management. But even the more independent-minded managers are setting themselves up for a fall, by investing in 'safe' big-cap stocks like Vodafone. To find out why blue chips and long-dated gilts won't save your pension, click here: How fund managers are making the pensions crisis worse
How to buy into Germany's coming property boom
- Germany is Europe's largest property market, but also its worst-performing - and that's just one of the reasons why now is the time to buy into German property. Back in February, MoneyWeek wrote about Germany's coming property revival - you can read more on gaining access to the market by clicking here: How to buy into Germany's coming property boom
