September 11, 2024: An Unpleasant, Yet Ordinary, Week in the Stock Market

For investors in U.S. stocks, last week’s 4.2% decline, as measured by the S&P 500 Index, was unpleasant but certainly not unique. In fact, declines of that size occur regularly enough to be considered ordinary.

We point to three drivers behind last week’s fall in stocks. First, anxieties about the direction of the U.S. economy are growing. The August payrolls report released Friday showed a weakening job market, raising concerns that the economy is moving toward recession. Second, many large-cap U.S. stocks—especially in the tech-heavy S&P 500—are expensive, increasing the likelihood of investors selling to capture profits. And third, Investors are facing what has been a difficult season for stocks. Over the past 30 years, September has been the weakest month on average for the S&P 500.

As unpleasant as last week may have been, a decline such as last week’s is ordinary. Over the past 20 years, the S&P 500 has experienced 12 weekly drawdowns greater than last week’s 4.2% drop. Yet, in all but three of these 20 years, the S&P 500 has produced positive returns, with an average annual return of 11%. Investors are wise to stay patient through the unpleasantness of short-term drawdowns—and, better yet, to take advantage of opportunities that those drawdowns may present.

Weekly Market Update: September 11, 2024