After a tumultuous early February where the DJIA plunged more than 1,000 points and smaller snappy rebounds – investors and strategists are now shaking their heads in some puzzlement and trying to make sense of the market’s future direction.

For the bulls, this correction is not just healthy, but normal, as any sharp price decline removes the speculative froth which in time allows investors to buy at more reasonable prices.

For the long-frustrated bears, last week’s steep dive was a turning point that worse is yet to come. It is also a confirmation of what we have been opining for more than two years now: that the markets have been overly pricey relative to company earnings, global economic and American political uncertainties, coupled with attendant risks on the economic realities emerging.

A bull market surviving almost 2 Obama administrations that spilt over to Trump, we’ve had nearly nine years of market ascent with no significant correction in the last two years. This makes the current bull market the second longest in history. (The longest bull market we’ve had so far was the one that ended in the year 2000 and lasted for about 13 years.) Traditionally, bull market cycles last for 4 to 6 years. And the increasing lifespan of the two longest bull markets of all time could be attributed to 2 things: advancements in technology and historically low interest rates.

In terms of “expensive”, the longest bull run of 2000 was about 25 times more expensive than it is today (based on S&P500 PE). For this one, the current PE is trading at 18.6X (based on S&P500) – where the median level is 15.2X since 2000. Last week’s drop pegged the market’s PE to 16.4X as of last Thursday – but this is still considered expensive.

If interest rates and company earnings were the only indicators to where the market is headed, then last week’s extraordinary dive was not just a correction, but a trailing sign of unsteadiness that is beginning to mount in our financial system. But there is more. How do we crash thee.? Let us count the ways:

Trump appointee Jerome Powell [to replace Janet Yellen] will have a lot on his plate at the Fed doing a balancing act for the economy as the new Chairman – where he needs to cushion an “accelerating” market and at the same time make shareholders happy. But as market forces are beyond the control even for extraordinary men, Powell’s debut in office was greeted with a spike in the 10-year Treasury bond yields which suggest the Fed’s policy in the days to come. The recent peak in 10-year Treasury bonds near the 3% mark seems to be correlating closely to the current volatility in the equities market as investors shift to bonds.

It shouldn’t be long until Trump starts tweeting and turning against his new Fed Chairman!

Nonetheless, some in the market believe that the world remains in a deflationary spiral, notwithstanding a recent firmer oil price. Any further bond weakness could now make for outstanding bond buying opportunities on the premise that interest rate rise expectations will not materialise as global growth will evaporate and that the equity corrections now occurring may, in fact, be telling us this.

Of course, it follows that a higher interest environment takes a severe toll on earnings growth. Making it more expensive for banks to borrow money, which they, in turn, circulate in the market – the lack of capital will hamper further expansion and growth for US companies. We will, therefore, see a downward revision on earnings forecast for 2018. At current prices, and with a possible earnings downgrade – PE ratios are still ridiculously high.

Corporate debt levels right now are at historic highs, and even higher compared to the debt levels just before the 2008 crash. With increasing interest rates, holding on at that level becomes vastly more expensive - especially for companies that are regarded as “too big to fail’. It is just a matter of time when debt will erode stability, and we will see more companies selling their shares to the market just to service debt - selling it down.

It should follow that when the Fed increases rates, the US dollar should rise as it is more attractive to hold on to dollar-based assets. Yet the US dollar has been on a steady decline against all the major currencies. Either there is an inherent systemic weakness in the US dollar, or other currencies are getting stronger. Are we looking at the US dollar being unseated by a petro yuan as well soon?

We always looked up to the experts to give us that sound and knowledgeable advice. And if Sydney based AMP Capital is to be believed, they are suggesting a moderate 10% pullback in equities.

The head of Blackstone expects stocks to fall by 20% this year – an aggressive number but highly possible.

We’ve listened to the bulls for far too long. Let’s lend our other ear to what the bears have to say for a change.