I can write more why I decided to pull out of Long term investing (I May be right/wrong), but you may not like my reasoning as you are a believer of long hold.
Here you go:
Even though FED raised interest rate last 4 times, only short term notes, less than 3 months, got rate hike in line with FED rate hikes.Until Jan 2018, nothing is reflected in long term treasuries like 10, 20, 30 year, but recently it is getting reflected.
Let us review why now? Until now, FED was buying MBS and other bond buying programs regularly. Even after QE money printing stopped, FED was reusing its return back into market. Since FED money is used, lenders (service providers) just marked up 1%-1.25% service fee which was low until Oct 2017.
From oct 2017, FED started rewinding QE money and started gradual increase in QE rewinding programs as given below.
When FED removed its support from Oct 2017, all lenders needs to source from outside market and that increased recent bond pricing hikes.
Going forward, FED rewinding increases every qtr to qtr, and also FED plans to hike the rates 3 times in 2018 and 2 times in 2019.
In short, money supply reduces and rates (ST and LT) gets increased.
So far market was execuberant about money flow and people were speculative (including bitcoin craziness) on getting higher returns than fundamentals.
When long term rates are increased, it affects mortgages, REITs, company finances (most of the companies run on credits, except cash rich companies). In short, bond prices hiked that will reflect on the profit margins of company results.
Last week, down drop 1175 and 1032 may be a forwarning for us as some of the wallstreet firms shedding big amount silently and impacts across the market.
IMO, the new FED chief will also continue to follow the same policy, esp rate hikes and QE rewinding, as usual.The market may be volatile until next FED meeting and then may be 15 days after the FED meeting is over.
In the long run, say one or two years, we will have reduction in profit margins of companies as the credit economy has the domino effect.Most of the cash rich companies, like GOOGL, may take one time tax payment, bring money to USA, buyback/invest when prices are lowest (They do not buyback when peak!)
Market makers such as wallstreet firms shed big holdings or shorting in between. When this happens all the stock market FATs will go off and only real fundamentals (not speculative) remain healthy and survive.
With this uncertainty, we will have major upswings in market until Mar middle, but chances are there for further fall in market prices.
Markets are made by WS firms, Investment Banks, Mutual Funds…etc, but not by individual investors like me, you or some mom/pop investors. When WS is acting, we can not withstand the force as they take away our money.
This is my own analysis/reasoning, believing or ignoring left to the forum viewers.
I may be right or wrong, but I hope that I will get a clarity by Mar end. I am ready to absorb the losses or gain of my own decision and I am used to this kind of decision in the past.