Yikes. This shortened trading week felt rather long, don’t you agree. As kids headed back to school, the market headed back to its wild trading ways (not seen all that often in 2024).

Weeks like this can be unsettling. Let’s be honest – there are very few people (other than short sellers) that enjoy seeing negative market moves. We all prefer the happy news anchors and the green arrows. It’s important to remember that markets move in both directions and that periods like the past few days are very normal.

While it’s often a fool’s errand to predict what is causing the increase in market volatility and investor fear (as evidenced by another surge in the VIX this week), there are a few major catalysts on deck for September that may be playing a role. As you know by now, markets feed off of certainty so any introduction of outcome dispersion can lead to bouts of mixed trading as observed this week – and all of these events present a range of outcomes for markets.

Here is what lies ahead this month:

August payroll report – this will be announced on 9/6 (likely before you read this post!). As we’ve been discussing the past few weeks, employment now seems to be a primary focus on the Federal Reserve as the labor market has been showing signs of weakness in recent months. A strong payroll report may spook markets into thinking the Fed won’t cut – but a “too weak” report may lead to more concerns about recession. It’s a fine needle to thread. We will see.

August CPI – next week (9/11) we will see the latest report on inflation. Again, any strength in inflation may spook markets (as it could deter the Fed from cutting rates). Further deflationary signs should be welcomed by investors

FOMC rate decision – the main event this month comes on 9/18 when the Federal Reserve makes its rate announcement. The narrative will matter a great deal, as will the degree of the cut. It’s widely believed that 25 basis points with the right messaging (on our way back to neutral and economy remains strong) would be ideal. A larger/”emergency” cut and/or more hawkish messaging could present challenges

These three catalysts for markets this month, along with the closeness of Congressional and Presidential elections and seasonality factors (September, namely the second half, is usually challenging time for markets), likely combined to produce the negative returns we’ve seen this week.

Two things to keep in mind as we wrap up a short – and down – week:

1.)Lack of apparent fundamental catalysts – there didn’t appear to be any material fundamental reason for stocks to sell off this week (ie: no company specific information, no material events (such as those noted above coming in the next few weeks), no major “miss” in data release). There were certainly a few economic reports (Chinese manufacturing data, JOLTS report, etc) but nothing that correlated with the downward moves we observed this week (especially on Tuesday)

2.)Still an exceptional year – As I always suggest to you during down weeks, breathe in and zoom out. Yes, this has been a tough week. But if you zoom out to the yearly returns, you will be elated.

Take the S&P 500. It is down 1.59% in five days. Not great. BUT, even after the past five days, it is up 15.4% year to date and 21.9% year-over-year. Exceptional. How about the NASDAQ? It has had a rough few days, falling 2.44%. Year to date, it’s up 14.1% and year-over-year, its return still stands at 22.1%. These returns are incredible – so don’t lose sight of the bigger picture.

September is off to a volatile start. But as always, it’s part of the journey. Keep moving forward, one step of a time. Smoother days await!

Onward we go,