An already weak third quarter was capped by a sharp September drop in markets. The S&P 500 lost 9.21 percent for the month and 4.88 percent for the quarter; the Dow Jones Industrial Average dropped 8.76 percent for the month and 6.17 percent for the quarter; and the Nasdaq Composite fell 10.44 percent for the month and 3.91 percent for the quarter. Markets resumed their downward trend in August and September after a bounce early in the quarter. Internationally, we saw the same behavior, with both developed and emerging markets down sharply in September and for the quarter. So, let’s take a look back at what drove these declines and then evaluate what it means going forward.

The latest jobs market headlines have been discouraging. One notable fact is that the number of jobs available declined by the largest amount on record, by almost 1 million, in one month. That generated a lot of hand-wringing. Another sign of potential weakness was the recent ADP employment report, which came in yesterday at 208,000, below the recent official number. So, is the job market really getting that weak?

A few things have happened in the past couple of days. But most people are focused on the stock market, which dropped sharply, bounced, and then pulled back again. As a result, there have been a number of headlines about how the bear market is back, and so forth. For the average investor, this kind of volatility is worrisome. How bad can it get?

One of the top headlines on the New York Times website is about how Congress is working to pass a bill to avert a government shutdown later this week, postponing it until after the midterms. Sounds like an important story! Yet when I look at both the Wall Street Journal and the Washington Post, there is nothing to be seen. Strange, that!

We are now in another downswing in the ongoing bear market. Using the S&P 500 as a measure, as I write this the markets are down 22 percent from the peak at the end of last year and just under 14 percent from the end of the most recent rally in August. This year, there have been four drops and three rallies—and we are down quite a bit. That doesn’t feel good. But, feel good or not, here we are. So, the real question is: what should we do about it? To figure that out, we need to look at two things.

The other day, I wrote a post about how, with expectations very hawkish for the Fed, the thing to watch for in the latest Fed meeting was whether Chair Jay Powell managed to sneak in some hidden dovishness. He could have said, for example, that the Fed remains data dependent, suggesting that it would ease if the data improved. He could have said, for instance, that there were signs that inflation is moderating. He could have said a lot of things.

So, what will the Fed do at its latest meeting? The short version is that almost everyone thinks it will raise rates by 75 bps (or 3/4 of a percent). Almost, in this case, means that a minority of people think the Fed will raise rates by more, like a full percentage point. The takeaway is that everyone does expect rates to go up—and by an amount that, prior to the past couple of months, would have been shockingly large.

Yesterday’s inflation print was a big surprise—a bad one. Yet, looking at the headlines, you could be forgiven for wondering why. The headline CPI, after all, increased by only 0.1 percent, after being flat the prior month. If we annualize those two months, the inflation rate would be only 0.6 percent per year, which is the opposite of what everyone is panicking about. It isn’t that simple, of course. But given that and the fact that inflation for the past 12 months was down from 8.5 percent to 8.3 percent, it would seem inflation is slowing. So, why the panic?

August was a resumption of the earlier pullback after a surprisingly strong July. The S&P 500 lost 4.08 percent, the Dow Jones Industrial Average (DJIA) dropped 3.72 percent, and the Nasdaq Composite fell 4.53 percent. Markets resumed their downward trend for the year, bouncing, in some cases, off long-term trend lines. Internationally, developed markets fell, although emerging markets eked out a small gain.

I have been saying for some time now that, as long as job growth remains strong, a recession simply isn’t likely. So far, that has played out, but the same question comes up every month: will job growth remain strong? We’ll find out on Friday whether that is still the case.