What we are seeing in the stock market is an unhinging from the Federal Reserve QE (Quantitative Easing Policy); where the rise in equity prices since the 2009 low have been due to and dependent upon QE policy. That means much of the gains were borrowed gains from liquidity pumping to beef up reserves in the financial system. Now we are faced with rising interest rates at a time I do not understand why (at Fed level), divergence from Bond Market by and large. This policy of QE had to be reversed at some point. Consequently, the market must find its’ new fair value given the fact that the Fed will no longer support equity prices.
Once the market finds fair value it will behave with less volatility moving forward, with low single digit returns for some medium term time frame. It is anyone’s guess what fair value is and when the markets will find that because the Fed created a monster in making US equity markets dependent upon its’ policy. However it had no choice; I would not want to be the Fed Chairman (dam do dam don’t position). This has also happened in Europe but at a lagging pace. Myself, I sold out of the market in the spring of 2015 at the highs and have never regretted doing so. My exposure to the equity markets is very minimal at this point in time.