The DOW has lost 25% of what it picked up since the election, and the problems now are that these moves are so big that they are forcing a lot of investors to unwind their positions elsewhere just to stay solvent.
1. We're in the second longest bull market in history (second only to Bill Clinton's), and well over the average of about 7.8 years between recessions.
2. As of this year, more boomers are drawing from the market than contributing to it.
3. Brick and Mortar Retail is collapsing everywhere, which is placing huge stress on the commercial real estate market. Online is one contributing factor, but a bigger one is demographic - a lopsided demographic where there are comparatively few new families (who spend heavily on houses, furnishing, clothing, cars and so forth) but lots of seniors who are literally swimming in redundant goods and have fixed incomes.
4. That CRE bust is in turn making a lot of bond issues worthless, and there's a huge amount of CRE debt that is now needing to be refinanced before it goes bad, which is pressuring interest rates higher.
5. The tech innovation wave has mostly played itself out and the sector has been quietly contracting for a while now. I'm in tech (information architecture), and have noticed that you're seeing fewer new projects now than at any time since about 2014. There's a lot of zombie positions out there that tend to inflate the picture of demand, but outside of a few regional areas, my sense is that tech is going to get ... interesting ... in the next six months.
6. The recent extreme volatility with bitcoin should be seen for what it is - investors who can't get decent returns in most sectors and so have been piling into high risk, low oversight positions in exotic financial instruments.
7. The tax package the GOP just passed is also hitting the bond market hard, precisely at the time when it's most vulnerable. Bond yield curves have been inverting left and right.
The stock market does not cause a recession, but a stock market crash is usually an indication that a bad recession is on the horizon. Crashes also tend to cycle between residential bond markets (housing) and commercial bond markets. It's eighteen years since we had a CRE market crash.
It's possible this is just a one off, but this wasn't due to a single glitch (the Flash Crash of 2015) or even contagion from a single event (the 2000 crash was directly attributable to the East Asian collapse of 1998 and the flattening and bailout of LTCM's investors). There was a huge build-up in the stock market based primarily upon the expectations of a strong pro-business government coming into power, but there's nothing really sustaining it other than hype. This means that the market is now reverting to fundamentals, which translates into we're in for a roller-coaster ride now for the next several months, anyway, and the resulting damage as investors and businesses become fearful will make a recession a self-fulfilling prophecy.
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