Keon is also concerned about trade. He said when the market turned higher Dec. 3 after President Donald Trump's meeting with Chinese President Xi Jinping, he began lightening up on stocks, and continued to sell into rallies. Stocks ultimately sold off on trade concerns even though the two sides have agreed to hold off on any new tariffs for 90 days and China has made some purchases of U.S. soy beans.
"We remain cautious. We think the market could get worse before it gets better. I still expect a positive year next year, but maybe something like 5 percent. You can get 2 percent in cash, without the volatility. ... So far we've been selling into rallies and whether we continue to do that, we'll have to see what the options look like," said Keon.
He said he was a net seller Thursday, as well and he expects big investors to slow down their activities next week in what's usually an illiquid time between Christmas and New Year's
"We're much more cautious. I've usually been bullish most of my career," Keon said. He said the market will bottom once everyone becomes sufficiently negative. "We may not be that far away. I don't think it's going to get that much worse."
Michael Arone, chief investment strategist at State Street Global Advisors, also sees more selling ahead and he recommends moving to the safer parts of the stock market, like the S&P aristocrats that have consistently increased their dividends.
"We need to see a bit more of a washout. We're getting closer to those level but I think the holidays will interrupt, and we'll have to see what happens when we regroup in January," he said. "Admittedly, I think the end of the bull market may be on the horizon, but I still think fundamentals will support reasonably high stock prices in 2019. But we shall see."
Arone expects earnings growth to slow as well, but to single digits.
"I definitely think the market is trading on sentiment. Underlying fundamentals are still reasonably OK, and I think that the negative sentiment is feeding on itself to a large degree, so selling begets more selling," he said. "We're seeing a reluctance to come in and buy on the dips. That has supported this bull market for the last 10 years. That's something we're observing from investors. ... But I still think this is a kind of normal correction."
Arone said one of his concerns is trade is just one source of friction between the U.S. and China, and a solution could take much longer to find.
"If this is a broader battle between two superpowers for global influence, it's a whole can of worms," he said. "I think what's happening is the market's not sure of what that looks like going forward and therefore, they're reflecting that in lower asset prices until they know whether this is trade or something bigger."
Arone said the Fed has also made itself a bigger problem for stocks, and he says investors should steer clear of growth and momentum names and look for higher quality value.
Federal Reserve Chairman Jerome Powell confused markets Wednesday with the Fed's forecast for lower growth but commitment to continue tightening, said Arone. That comes after Powell's previous pivot from a comment that the central bank was far from neutral to a statement that it was near neutral, just a month later. Neutral is the rate where the Fed is no longer seen as being accommodative and where it could stop raising interest rates.
"He was very steadfast on the fact that interest rates will continue to rise, and we're on autopilot on the balance sheet. Yet they're concerned about global risks," Arone said. "It's like speaking out of both sides of your mouth. Investors are looking for clarity, not confusion. ... It seems the more he talks, the more confusing it is. Maybe less is more."
Emanuel said the market has worried that Fed tightening, both through rate hikes and its balance sheet roll-off, are becoming a problem for risk assets and growth.
Powell said Wednesday, after the Fed hiked rates by a quarter point, that the Fed's balance sheet program was on auto pilot, meaning it would continue to allow $50 billion of Treasury and mortgage-backed securities to roll off each month, as they reach maturity. The Fed has tapered the amount of securities it replaces, thereby shrinking its balance sheet.
"The market has not cared at all about the balance sheet reduction and about a week or two ago, it started caring about the balance sheet reduction because the belief was policy was becoming overly tight," Emanuel said.