Should Investors Be Nervous?

Weekly Market Update | September 13, 2021

Highlights

Globally, stocks finished the week lower with the MSCI All Country World Index falling 1.2%. In the U.S., the S&P 500 dropped 1.7% while the Dow Jones Industrial Average slipped 2.2%. Shares in Japan surged 3.5% as investors bought beaten-down stocks. The 10-year U.S. Treasury yield was little changed – rising just under 2 basis points to 1.34%.

Investors appear increasingly nervous about the prospect of a potential stock market correction (defined as a sell-off of 10% or more). Are they right to be nervous? We think the short answer to the question is no.

We are not arguing that a pullback or correction is not possible. Indeed, there are several catalysts coalescing that could cause one, but we think that investors should remain focused on their long-term goals and stay invested. The U.S. economy appears to be moderating some, but remains on solid footing overall. If anything, the economy appears to be suffering from too much demand chasing too few goods, services, and workers. Eventually those supply-side constraints will ease as the economy continues to normalize as the world learns to coexist with COVID-19. That could potentially support further corporate earnings growth and higher stock prices in the years ahead.