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Market Tumble an Overdue Reality Check?

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This week's sell-off in global financial markets, which has spared few asset classes, is a reflection of investors reassessing their outlook for the global economy, said investment strategists, as the recovery in the world's two largest economies exhibit signs of weakness.

"Investors are a lot more concerned given what we've seen in terms of data - whether it's China, commodities, gold. It's fair to say that consensus estimates have been quite high and now is the time for investors to be realistic about expectations in terms of growth numbers, prices," Medha Samant, investment director, Asian equities at Fidelity Worldwide Investment told CNBC on Tuesday.

(Read More: 'Armageddon' Trade Is Off as Gold Price Tumbles)

Major markets in the region such as Japan's Nikkei 225 fell as much as 2 percent in early trade on Tuesday, while Hong Kong's Hang Seng and Australia's S&P/ASX200 declined 1.1 percent and 0.6 percent, respectively.

This came on the heels of a steep decline in U.S. equities which posted their sharpest one-day drop this year on Monday, with the explosion at the Boston Marathon adding to the negative sentiment.

Commodities also extended their losses on Tuesday with Brent crude sliding 2.4 percent to $98.25 a barrel and spot gold breaking through key support levels, down 1.7 percent to $1,331 an ounce. The precious metal has lost about 15 percent over the past seven days.

Worries over the outlook for China's economy, which posted a lower than expected growth of 7.7 percent in the first quarter, led some economists to revise lower their gross domestic product (GDP) forecasts for the full year.

The National Australia bank reduced its 2013 GDP forecast for China to 8 percent from 8.2 percent, while Nomura reduced its expectations to 7.5 percent from 7.7 percent.

(Read More: Australia Central Bank: Signs Low Rates Working)

Doubts over the recovery in the world's largest economy were raised after data showed that retail sales fell in March by the most in nine months and job growth also slowing sharply in the same month.

Tony Nash, managing director of financial analysis firm HIS, said the combination of events is pulling investors out of the "status quo," forcing them to rethink their trades.

"People are starting to look at the trades that they have now and the assumptions they have behind those trades and reconfigure their hypotheses as they go into the market," he said.

How Long Will the Sell-Off Last?

Evan Lucas, market strategist at IG Markets said while he expects the sell-off to be "sharp and indiscriminate," it is likely to be short-lived.

"Mid-week FOMC [Federal Open Market Committee] voting members will be talking - and they will likely talk up the whole idea that they will keep asset expansion in the near term so deflationary fears will be alleviated," he said.

(Read More: Too Big to Fail: Fed Squad Gains Ground on Bailout Thinking)

Several Federal Reserve officials were looking at possibly ending the asset purchase program started in 2008 by later this year, according to the latest minutes from the central bank.

Todd Hagerman analyst at brokerage Sterne Agee, agreed that the correction in equity markets will be limited. "There's a global liquidity infusion that will continue to provide underlying support for market globally," he said.

(Read More: Fed Doves Plan Down Threat of US Inflation)

Ben Lichtenstein, president of market analysis website Tradersaudio.com, however, is more concerned that the downside in markets, in particular commodities, could go much further than investors are anticipating.

"When you see a move start off like this, with such high conviction...this is the kind of move that could continue a lot further, a lot longer, a lot stronger," said Lichtenstein.

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