The stock market rally got mugged by economic realities and a global slowdown

So much for the rally. On Thursday, the S&P 500 got within 2.4 percent of its historic high only to tumble on Friday. We got mugged by slower global growth again.

Remember the bull narrative: The Fed and the central banks have our back, the tariffs are going to go away, the Chinese are going to stimulate their way out of the slowdown and the Europeans...well, this is probably the bottom in the lousy economic numbers.

While we do have a dovish Fed, that factor is now priced into the market. The president has made clear there may be no immediate reduction in tariffs, and the European manufacturing data — particularly Germany — was so bad that 10 year bond yields over there went to zero.

Here in the U.S., the yield on the 10-year bond fell below the 3-month yield, a so-called inversion that has in the past signaled a recession is around the corner.

So, the bull narrative is running up against reality. If this weak global economic growth narrative stays with us, it means stocks are pricey at this level.

The low interest-rate environment is having an effect on the markets. For the past several weeks, new highs on the S&P 500 have been exclusively interest-rate sensitive stocks of REITs (Equity Residential, Essex Property, Kimco, Mid-America Apartment Communities) and utilities (NextEra, American Electric Power, Exelon, Xcel).

This week, consumer stocks (Merck, Procter & Gamble, General Mills, Kimberly-Clark, Mondelez) have joined the crowd. It's a defensively-priced new high list.

Regional banks are getting clobbered. Fifth Third is down 11 percent, Comerica is down 9.7 percent, KeyCorp is down 9.6 percent and Huntington Bancshares is down 9.3 percent.

While many worry about how a flat yield curve affects banking business, for most regional banks short-term interest rates are the most important determinant, and with 2-year yields essentially at their lowest levels in 12 months, that's a problem.

A bank's loan book would typically consist of a mix of commercial & industrial loans, most of which are tied to a shorter-term variable rate. Fixed-rate loans like auto loans are also tied to medium and shorter-term rates. Mortgage loans are tied to longer term instruments like the 10-year, but they are typically only 20 percent of the book of most regional banks.

Bottom line: Low rates are both a blessing and a curse for investors.