The stock market swoon since late July has been ascribed in the media to the conflicts in Ukraine and elsewhere. But they’ve been going on for weeks and month. And they’ve just now suddenly started to impact stocks? Or was it something else, something darker that the new generation of investors and traders has never lived through before?

As a Wolf Street contributor Michael Gorback put it in an email:

I feel like I woke up on a different planet. Iran is fighting to defend the government of Iraq. Iraq wants to use its air force to lend support to the secessionist Kurds fighting ISIS. And Egypt, Jordan, Saudi Arabia, and the United Arab Emirates are taking the Israeli side against Hamas.

Perhaps the market feels like it too has woken up on a different planet, one where the Fed is tightening, after so many years of money-printing and ZIRP that there is now a new generation of traders and investors who can’t even imagine what the markets would look like without QE and ZIRP, a market where leverage and borrowing actually would have a real cost.

QE will be gone by this fall. Some stock-hype artists still say that the Fed can’t actually stop QE, or that it will restart at the first squiggle in the markets. That’s not what the Fed is saying. The only question that remains is ZIRP, and it increasingly looks like Yellen wasn’t kidding when she warned lawmakers in July that, given a few ifs, interest rate hikes “likely would occur sooner and be more rapid than currently envisioned” [Yellen Warns Investors].

Tuesday, we got some additional insights into the dynamics of the Federal Open Markets Committee meeting in July, this time by Dallas Fed President Richard Fisher. During an interview on Fox he was asked why, as a hawk, he hadn’t dissented at the meeting.

He still had a “hawkish slant,” Fisher said. But the committee “is coming in my direction, so I didn’t feel the need to dissent,” he said. “I feel comfortable with where the committee is going.”

And the committee was getting more hawkish. He referred to the report released on Tuesday by the Institute for Supply Management, which showed that in July service industries had grown at the fastest rate since December 2005. “Awfully strong,” is what he called it. And if the economy remains on that track, the FOMC will need to “move the date of lift-off further forward than had been projected.”

If the FOMC “doesn’t keep moving in that direction, I will dissent,” he promised. “But it’s more important, I think, here, to really work with the group, and make sure we achieve a consensus, and we’re all behind a certain direction. And I think we’re moving closer to my direction, but time will tell.”

This perhaps is what the markets are feeling too – that the Committee is moving closer to Fisher’s hawkish stance. And some of the Fed governors, including Fed Chair Yellen, are pointing at the problems QE and ZIRP are causing, at the distortions, at the insane reach for yield, the “stretched” valuations, the senseless risk-taking their policies have espoused. And they don’t want to be the ones who get blamed if the financial system goes down a second time in less than a decade.

It seems market participants who have been happily floating through the QE and ZIRP ether for years are now coming out of it, and for some, it must feel like waking up on a different planet.

Many are still in denial, and their forecasts of rate hikes are well below the median forecast issued by the Fed governors. But “it wouldn’t be good” if that gap gets closed “with great rapidity,” fretted Richmond Fed president Jeffrey Lacker. Read…. “It’s Going to Be Messy” In the Bond Market (And Stocks Won’t Be Spared)

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