If there is to be a sudden dropoff in stocks it won't happen until an unexpected disruption rocks the market.

The Dow Jones Industrial Average fell 0.75% on Thursday, Oct. 4, and the S&P 500 fell 0.82%. The Dow has risen 7.54% this year, and the S&P 500 has gained 8.33%. Thursday's down move was, in part, caused by a steep rise in bond yields.

The 10-year yield rose to as high as 3.23%, and the 30-year jumped to 3.71%, both signifying expected interest rate increases and inflation for 2019. It was inflation and cooling demand, essentially, that sparked investors' fears.

The pullback was healthy. Investors seem to be modulating their equities weightings to what I believe are reasonable expectations for the economy, therefore, stock gains probably won't be excessive this year. Indeed, we can see that the big indexes are around their historical annual returns. Because of this, and because investors aren't neglecting important economic data points and indicators, I think there's a reduced likelihood of a major market correction, like the one in February. More modulated downward movements in stocks will give investors a chance to limit exposure to equities if they so choose and sit on safer assets while they observe and do their research.

In that way, we won't have a sudden jolt where investors lose tons of value in one day. And indeed, volatility has been down for the year. The VIX is at 14.3, well below its historical average of around 19. 

Essentially, the Federal Reserve is doing one thing it aims to do: protect against asset bubbles. Financial markets are responding in kind, recognizing the Fed's rationale for rate hikes. 

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Maybe inflation - if it continues to be strong - will limit consumer demand. Stocks to watch will be those very sensitive to demand, such as housing and construction shares, autos and banks. For construction stocks, look at KBR Inc.  (KBR)  and Toll Brothers 
Inc.  (TOL) . For autos, which are impacted by tariffs and will be forced to raise prices, look at General Motors Co.   (GM) , Ford Motor Co   (F)  and Fiat Chrysler Automobiles NV  (FCAU) . Banks, which want loan volumes to be strong even through interest rate hikes, could be impacted by limited demand. Watch JPMorgan Chase & Co.  (JPM) , Citigroup Inc.  (C) , and Wells Fargo & Co.   (WFC) . 

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