A recent candidate once warned his audiences that if he became president, Americans would “win so much, you’ll get tired of winning.” Donald Trump did indeed get elected, and his warning rang true on Wednesday, as major U.S. stock markets plunged in tandem—thanks in part to signs that a very healthy economy could be stoking inflation. Tech stocks, in particular, fell hard, as the Nasdaq fell 4.1% to approach “correction” territory.
The Dow Jones Industrial Average and the S&P 500 fell 3.2% and 3.3%, respectively. All three indexes were in decline all day, and each took roughly half their losses in the last two hours of the trading day.
To keep things in perspective, this wasn’t even the markets’ worst day of the year—they stumbled hard and fell further in February. But with the S&P 500 down for the fifth consecutive days, investors were sweating more than usual when the markets closed.
What made investors so blue, and indicators so red? It’s never easy to pinpoint, even in hindsight, but some economic trends are becoming noticeably more pronounced. And those trends, in turn, tend to prompt many investors to sell stocks perceived as more risky—even when the trends are themselves by-products of good economic news and strong market performance.
Everybody hates inflation…
Ever since the depths of the Great Recession, employment has been increasing, but without significant rank-and-file wage growth. With unemployment at a 48-year-low, that trend is finally starting to change, raising fears that inflation, which has also stayed historically low, could flare up, eroding the value of stocks, salaries, your house, and pretty much everything—and chasing some skittish investors out of the stock market.
And higher rates are changing habits
Worries about inflation also tend to drive down the prices of bonds—and bond yields rise as bond prices fall. (The Federal Reserve has also helped push prices down as it sells off some of the bonds it bought to support the economy during the financial crisis.) As recently as June of 2016, 10-year Treasury bonds yield just 1.43%; when the markets closed Wednesday, they traded at 3.19%.
Why is that bad for stocks? As bond yields rise, risk-averse investors—ranging from the proverbial cautious retiree to gigantic pension funds—become more willing to park more money in bonds and collect the interest. That money has to come from somewhere, and often it comes from “higher risk” stocks, like those in the tech sector.
New money may be drying up
After Trump’s election, tens of billions of dollars in new money flooded into mutual funds, a trend that no doubt has contributed to the current bull market’s unusual longevity. As the Wall Street Journal reports today (subscription required), citing Morningstar data, that trend appears to be slackening.
In the first three quarters of this year, mutual fund net inflows fell to $281.7 billion, down 46% from last year’s pace. Some of this may well reflect investors taking some profits after enjoying more than nine years of stock gains (a strategy that Fortune recently wrote about in more detail).
Trade tensions are bad for tech
With today’s losses, the Nasdaq is down 8.4% from a high it hit just six weeks ago. Thanks to their bigger-than-big run in recent years, many tech stocks trade at higher price-to-earnings valuations than a lot of their peers. If you’re one of those cautious sorts who wants to take winnings and hedge your bets, you’re more likely to sell Amazon and Nasdaq than, say, Caterpillar or a potash company. And if you’re more broadly pessimistic about how long the economic good times can last, this is the kind of “sector rotation” you may have been considering anyway.
The other wild card is trade. Tensions continue to burble between the U.S. and China, and an escalating trade war could have a particularly nasty impact on anybody depending on Chinese-made components—a category that includes smartphone makers like Apple (down 4.6% today) (aapl) and a lot of the semiconductor industry.
CORRECTION: Due to an editing error, earlier versions of this article described stock losses as occurring Tuesday, Oct. 9, rather than Wednesday, Oct. 10.