The below chart is a good indicator of how the market works.
It is said that the market reflects the future, not the current fundamentals.
I agree with his. Investors in the market look forward to see what profits companies will make and therefore what the future price of the company will be. This in turn should provide capital growth.
But what happens when they get it wrong? Large corrections happen each way.
As indicated in the below chart you can see when the economy over shot the mark and then pull back again over shooting the mark on the downside.
Once again we find ourselves at a point where the US seems to have pushed monetary policy to far and now needs to pull back. This leaves bond investors nervous, as easing could easily see bond prices collapse.
There are lots of opinions on what he Feds should or will do. Personally I have no opinion. What I continue to do is buy undervalued companies for the long term.
I expect that there will be a short-term pull back but if the companies I invest in have a strong foundation they will survive. Long-term it is the dividends I am interested in, as growth will take care of itself.