The Standard and Poor’s (S&P) 500 has risen 15.9% year-to-date (YTD) in 2021, including the decline of risk assets during the third quarter, or during September more specifically. This pullback should not be too surprising, as September is seasonally the worst-performing month, generating negative average returns over the last ten years. September 2021 was also the S&P 500’s worst-performing month since the height of the pandemic in March 2020.
Market volatility was fueled by deteriorating sentiment from the emergence of the Delta Covid variant, which somewhat restrained economic activity. While cases seem to be peaking, they could remain an issue as fall progresses.
Inflation and supply chain disruptions are also on investors’ radars. These matters should moderate over the long term, but renewed disruptions from Covid globally threaten to delay normalization further into next year. And of course, the fear of financial contagion emerging from China’s Evergrande (and broader real estate) crisis weighed on markets over the last number of weeks.