September was a bad month for the markets. In the U.S., all three major indices were down. Developed markets dropped, and emerging markets did worst of all. These declines resulted from the weakening of the economic data, driven by the spread of the Delta wave of the virus. Job growth was down, layoffs trended up, and consumer confidence dropped.

After a great start to the quarter in July and August, September was when the storms hit. Here in the U.S., markets pulled back significantly. The Dow declined by 4.2 percent for the month and 1.46 percent for the quarter. The S&P went down by even more for the month, at a 4.65 percent decline, although it gained 0.58 percent for the quarter. Finally, the Nasdaq trailed by even more, at a 5.27 percent monthly drop and a 0.23 percent loss for the quarter. Abroad, international markets were also hit, with developed markets down for both the month and quarter, at 2.9 percent and 0.45 percent, respectively. Emerging markets dropped 3.94 percent for the month and 7.97 percent for the quarter.

Today, I want to apply the analysis we laid out yesterday to the great financial crisis (GFC). The idea is to see whether it would have given us some advance warning of just how bad that crisis got. If so, the analysis might be useful in identifying future crises that are actually worth worrying about.

We are now entering the phase of the market cycle where worries start to proliferate. We’ve already talked about Evergrande, supply chain issues, rising interest rates, and so on—and the risks for all of these things are real. As the situations evolve, though, each of these categories and others will present themselves in different ways. For example, looking at China, we have Evergrande, the demographic rollover there, trade and competition issues with the U.S., and many more. Even as one issue (Evergrande) starts to recede from investor consciousness, others will rise again.

This post will be on the short side, as I am leaving Laguna Niguel in California at the end of the Commonwealth Summit Club conference. I wanted to take some time, however, to comment on something that has been forcing itself to my attention all week: the supply chain issues that are driving much of the current inflation concerns.

After the past several crises, some real and some manufactured, we are now on our way to the next one: the debt ceiling. To pay for the spending Congress has authorized, the Treasury needs to borrow more money. But it can’t borrow more money because Congress has said there is a ceiling to how much it can borrow, and the Treasury has hit that ceiling. So, Congress has essentially forbidden the Treasury to borrow enough money to pay for the things that Congress has said the Treasury has to pay for. If this makes no sense to you, well, I agree. But this is where we are, again. We have seen this movie several times before.

Here we are on the cusp of the end of the most important Fed meeting since, well, the last meeting. The headlines are going back and forth as to whether Chair Powell will announce tapering (i.e., slower Fed purchases of bonds). The consensus is no. But if not, what will he do? All is uncertain.

For those who haven’t heard, global markets slumped yesterday as a Chinese real estate developer, Evergrande, was reported to be approaching bankruptcy. For many, this news brings to mind the great financial crisis of 2008. Back then, a collapsing real estate sector almost took the U.S. and global banking system down, starting with the Lehman Brothers investment bank. Now, the fear is that Evergrande could kick off China’s “Lehman moment.” In other words, many are starting to worry that we could be facing another global financial crisis.

This coronavirus update will be shorter than those I have done previously for a couple of reasons. First, there is not much new news. While case growth at the national level appears to have rolled over, other national data is mixed. The case slowdown is by no means certain. Second, the national case data is significantly misleading for many areas, which continue to suffer much higher infection rates than the rest of the country. So, while it is worth taking a look at where we are, the medical situation remains uncertain.

One question I get a lot is whether the market is overvalued. Or, to put the concern the way my son would, is the market crazy expensive? All year, even as the market continued to rise, many people called out high valuations. Now that the market has pulled back, at least for the moment, fears are rising that we may see valuations collapse—and the market with them. Should we be worried?