One Of The Biggest Bulls For The Past Few Years Has An Ominous New Tone

Is it different this time?

For years we've gotten accustomed to rising markets and dips always being bought. But the recent selloff in the market (which was driven home by Thursday's big 200+ down day in the Dow) is making some new folks nervous.

The fundamental reason? The end of ultra-easy Fed policy appears to be in sight, and short-term interest rates are rising.

Here, for example, is the latest look at interest rates on the 5-year bond, which is hitting multi-year highs.

One of the steadiest voices of bullishness in recent years has been David Zervos of Jefferies, who has argued for a long time that a reflationary Fed was the bullish investor's best friends.

Anyway, he kind of seems to be taking a new tone in his latest note titled: "The Dollar Rains On The Fed's Parade."

He writes:

It was meant to be a time for celebration - a time for high fives and smug smiles. QE is ending. And QE worked. Those around the FOMC table, the ones who fought the good fight, should be out there taking a victory lap. But these victory laps for the good guys - Yellen, Evans, Dudley and Lockhart - look to be on shaky ground. Their speeches this week have sounded warning bells not trumpets. And to be sure the message was complicated and confused. On the one hand we heard - "let's not get ahead of ourselves", and on the other hand we heard "let's prepare for higher rates than the market is forecasting". These are not the usual "I got your back" speeches from the doves. Those came back in the easy BTD days. Of course, we all know the Fed has our back if it all goes wrong, but none of us know who has our back when it all goes right. So as the economy enters this sustained recovery period, and QE is turned off, the messages get muddled.

Zervos emphasizes that he's not in the "bear" camp or anything. He just thinks things are due to get sloppy, as the Fed tries to ease off the gas pedal in a careful and clear manner. Ultimately, he does think the Fed heads will figure it out and return us to "Goldilocks" (where the economy isn't too hot and isn't too cold, and everything can keep going swimmingly) but for now he's predicting some messy times and volatility.