Watching events unfurl on the business channels with my sun-kissed balcony but a few paces away was a somewhat unreal experience. Yet it gave me a degree of perspective which I might not have enjoyed if I had been present on a dealing floor.The journey home gave me the chance to reflect on what might be going on. This proved valuable as I stood in a TV studio shortly after the US inflation figures were announced. In half an hour, the FTSE 100 lost more than 100 points, delivering a fall that day of nearly 3 per cent, a performance that was replicated in the other major European bourses. In the US, trading had to be suspended briefly because of the sheer weight of selling orders. But what had changed? The answer was very little. The apparent trigger for the sell-off on Wednesday was the 0.6 per cent rise in the US cost of living index. But wasn’t that broadly in line with expectations? Higher energy costs were always likely to translate into a rise in inflation. The only real surprise was that other costs, notably food and housing, had also risen. So US interest rates seem set to rise again. That is no surprise either. Federal Reserve chairman Ben Bernanke has already indicated as much. But investors took fright and shares took a tumble. Is now a good opportunity to pick up a bargain or two? Before you rush to the phone to place those buying orders, there are a few things to consider. First, volatility has returned to markets. Share prices are swinging around more than they have done for over three years on both sides of the Atlantic. What this means to investors is that buying and selling have become trickier manoeuvres to exercise than has been the case recently. Second, the seemingly limitless supply of cheap liquidity may be running out. The way in which some investors were diving for cover as trading conditions became tougher indicates that there has been a degree of gearing around. That seems particularly true of commodities, where fears exist that some traders will be unable to comply with the stricter conditions on margin calls that are being applied to reflect the current level of volatility. Derisking portfolios is sensible at a time when more than a little froth is present in markets. The riskier assets have enjoyed the greatest buoyancy in this bull market and will undoubtedly bear the brunt of any retrenchment although you can be reasonably certain that the market will be as indiscriminate as ever in the punishment it dishes out. There is no reason to believe that the bull run is over but it is worth remembering that investment is never without risk. On balance, I consider this shake-out to have provided welcome respite to markets that were starting to look overheated. Buying opportunities will be thrown up but more than the usual care needs to be exercised. It is still too early to go back into more volatile areas such as emerging markets but in some places, such as here in the UK, real value is emerging.