It's not like there's a panic. There has not been any intense selling pressure, but there has also been no buying interest. There's just been no real interest in the market, and you can see it in the volume: many days it has been 10-20 percent below normal levels.
What's going on? Several factors have combined to create a dangerous "stew" of uncertainty for stocks. There is not one issue, but throw them all together and you get a slow-motion, low-volume drift downward:
1) Fiscal reforms pushed out. Did you notice Trump, while in Milwaukee Tuesday, made a point of saying that, "[W]e're in very good shape on tax
2) Weaker "hard" economic data. From retail sales to the Consumer Price Index to the Producer Price Index, economic data has been weaker than anticipated. As a result, the odds for a Federal Reserve rate hike in June are now down to 44 percent, from close to 60 percent a little more than a week ago.
4) Bond yields trending downward. This wasn't supposed to happen. The core principle of the "reflation trade" was, well, reflation. Commodity prices up. Bond yields up. Not now: after hitting multi-year highs of roughly 2.6 percent in December and March, 10-year yields dropped below 2.20 percent yesterday. True, shorter term rates have not dropped as much, but that has only flattened the yield curve, a big problem for banks who profit when the yield curve steepens. The cause is hotly debated, but it certainly reflects concerns about weaker data and geopolitical issues, and weaker bond yields in Europe have also put downward pressure on our yields as well.
5) Earnings. This is the most recent risk. Here's why: stocks are expensive. Valuations are high. The risk is to the downside. This leaves stocks very vulnerable to a selloff, particularly if there is even the slightest hint of an issue. If you don't believe me, look at what happened to Goldman Sachs yesterday, and to IBM today. IBM beat on the bottom