Here, in my view, are the reasons for today's stock selloff (as many know I've been looking for stocks to move down in price for some time now).
1) The second stage of Fed tightening (i.e. a December rate hike) looks like it's about to begin; this has investors afraid and uncertain how corporate America and stocks will react when this eventual rate rise occurs
2) As measured by the ratios of market capitalization to GDP, median P/E ratio, as well as several other econmic/stock valuation models, the market has only been more expensive once -- in 2000 (and that didn't end well at all)
3) Revenues are decelerating and corporate earnings were softer than expected in the previous quarter
4) These slower earnings and higher borrowing costs will lead to a slower rate of stock buybacks and dividend increases (which historically have been a good harbinger for stock prices)
5) The third-longest bull market in Wall Street history is showing signs of wear and tear. Small- and mid-cap stocks badly lag the mega-caps (and in healthy markets small/mid cap stocks lead), and the cumulative advance/decline line doesn't confirm the S&P 500's recent runback toward its 2015 high. The Dow Jones Transportation Average is also still 10% below its December 2014 peak.
6) Low commodity prices reflect a punk and slowing global growth picture.
7) U.S. manufacturing growth has slowed and some industrial CEO's have begun to use the word "recession" when they talk about the prospects for their specific businesses going forward
8) Retail stocks have been performing badly of late and many companies said in their 3rd quarter earnings releases that they are uncertain about how good the holiday retail season is going to be
I continue to expect stocks to move sideways and possibly down over the near term as I believe the recent gains we saw in October need to be digested as stocks got overheated to the upside....hate to be a debbie downer but that's just the way I see it (so take that with a grain of salt). I think the best course of action is to err on the side of caution and keep elevated levels of cash in your investment account.
