The S&P/TSX has officially undergone a market correction, having dropped 10% from its highs, notes National Bank Financial in a new research note. The brokerage firm suggests that the market has further to fall, too.

“While it is still too early to declare the end of the bull market, the S&P/TSX has officially experienced a correction, which is usually defined as a 10% pullback,” NBF observes. “Indeed, at 11,198, the index has now lost 10.3% (1290 points) from its April 19th high of 12,487.”

The firm reports that the index had gone 959 consecutive trading days without a correction of 10% or more, the longest such period of the last 35 years.

“High-flying financial instruments such as emerging markets, small caps and commodities have gone into retreat since early May as investor sentiment swung abruptly from risk appetite to risk aversion. With all major central banks tightening in sync for the first time in 15 years, some investors are running for the exit,” it notes.

And, it reports that, according to Emerging Portfolio Fund Research, funds investing in emerging-market equities had net outflows of $8.4 billion during the past three weeks.

“Given the predominance of natural resources in the S&P/TSX and the high correlation of its materials sector to emerging markets, this correction is not over yet and we maintain our 10,500 yearend target on the S&P/TSX,” it concludes.