Since the Great Recession, the Fed has transformed itself into an entity more and more responsible for asset prices. This was the stated goal since 2009 as the Fed adopted a new philosophy called the "Wealth Effect." The thinking behind it was simple: growth in asset prices would translate to an increase in consumer spending and hence demand itself. It was a 'trickle down' economic philosophy an increasingly financialized economy.
This backdrop has defined our post-2009 era which stirred certain pathologies that were reflected in the greater culture and politics. It was the time when 'finance became a culture' and actual-productivity plummeted across most developed economies, especially the United States. But somehow in spite of the accumulating dysfunction across most key areas, everything kept trudging along, partly thanks to investors being satiated with record returns.
While the near-zero interest rate regime may now be ending, it is worth considering how much of the water we were all swimming in excused poor state capacity, distorted economic fundamentals, and how it even kept a lid on the dysfunction potentially blowing up in our faces. Now that we have to reckon with these realities, it may be wise to ask how many worldviews were simply products of the the cheap money regime - which is now, in a shock to many, coming to a close. Whether or not it will easily be let go, however, is another matter.
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Nit: The association is definitely negative - but not inversely proportional. As a reductio ad absurdum, when that graph went negative, asset prices didn't go negative. The reasons are
Much of the returns on stocks are to compensate investors for risk. Especially when interest rates are ~0, the financial market is much less a market for funding ideas and much more a market for distributing risk. For instance, many tech startups have negligible financial costs but request funding anyway so the founders can draw a salary while they hack away for a year or two. This is very much not an investment in the business and very much the founders trading some expected returns for offloading risk onto venture capitalists.
If there are no risk-free assets that maintain their value in the face of inflation, then it is completely logically consistent for real interest rates to be negative. The fact interest rates went negative in 2020 suggests this is, indeed, the case.
About 26% of government bonds held by the federal reserve have more than 10 years remaining until maturity. So, contrary to your claim ("The Federal Reserve has no control over it"), the Fed has some control over these yields.
Federal regulations require financial institutions to hold certain amounts of low-risk assets. This increases demand for such assets and artificially drives risk-free yields lower relative to risky yields.
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