There’s an old saying that the best way to handle pressure is to be like a duck: calm and composed on the surface, but paddling like crazy underneath. If you’ve ever watched a mallard glide across a pond, you know the look. There isn’t any splashing, no visible effort, just a smooth V-shaped wake trailing behind it. Meanwhile, below the waterline, its feet work nonstop, spreading the webbing wide to push water back, then folding it up to slip forward again.
It’s a saying people usually apply to executives, new parents, or anyone who has hosted Thanksgiving. But lately, I think it describes the stock market better than any of them.
Calm on the Surface
On the surface, things look great. At the end of September, with three-quarters of the year over, the S&P 500 was up a healthy 12% for the year, and sat about 2% below the record high it set in August. The Nasdaq hit a fresh all-time high as recently as September 22. If you checked your investments once a month (which, honestly, is more than enough), you’d have very little to complain about.
Under the surface, though, the story is very different.
As of the end of September, 59% of the stocks in the S&P 500 were down 20% or more from their all-time highs. That’s the textbook definition of a bear market, and it applies to the majority of the index. Not only that, 41% were down at least 30%, and 17% (roughly one in six) had been cut in half or worse. And these aren’t companies you’ve never heard of either. They’re names you know, like Nike (which we discussed a few weeks ago), Lululemon, Disney, Chipotle, Campbell’s, Kraft Heinz, Pepsi, the list goes on and on. One analyst summed it up well this week, calling it a “stealth bear market.”
September alone tells the story. The equal-weight S&P 500, which treats every company the same (so a regional bank counts as much as Nvidia), fell 5.0% for the month. The regular S&P 500 fell just 0.5%. About three-quarters of the stocks in the index declined during the month, and the share of stocks trading above their 200-day moving average (a common gauge of whether a stock is in a long-term uptrend) dropped to about 49%, down from roughly 75% over the summer.
How Is This Possible?
So how can most of the index be in a bear market while the index itself sits near a record? The answer comes down to how the S&P 500 is built. As most of you are aware, it’s weighted by market capitalization, which means the bigger the company, the bigger its influence on the index. And right now, a handful of companies have an enormous amount of influence. The ten largest stocks make up about 40% of the index, more than double their share from a decade ago.
When names like Nvidia, Apple, Alphabet, Microsoft, and Meta are doing well, they can carry the index even while hundreds of other stocks are falling. Meta alone was up 27% in September, thanks to the launch of its new AI agent app (Muse). That’s a lot of heavy lifting from one company.
This concentration also explains why valuations can look either reasonable or alarming, depending on which measure you use. The index trades at about 21 times this year’s earnings, which isn’t outrageous given the explosive AI-driven growth at the top. But the Shiller CAPE ratio, which averages inflation-adjusted earnings over ten years, sits at 41, in the 99th percentile and within a whisker of its all-time high in late 1999.
Should We Be Worried?
If you’re looking for reasons to worry, there are a few (but there always are). On September 21, the S&P 500 rose more than 1% to close within 1% of an all-time high, yet more stocks in the index hit new 52-week lows that day than new highs. By one count, the only two prior times that happened were July 23, 1929, and December 12, 1999. Spoiler alert: the following few years were not kind to investors.
But before anyone starts stockpiling canned goods, there are two important caveats. First, two data points don’t make a pattern. Second, Bespoke Investment Group looked at every month since 1990 in which the average stock lagged the index by more than four percentage points. September was only the eighth time it has happened. The first three (2000, 2008, and March 2020) were genuine turning points for the market. But the four instances since 2023 were false alarms, and none led to poor results for the broader market.
It’s also worth noting that the underlying businesses aren’t necessarily broken. A Morgan Stanley managing director pointed out this week that the median S&P 500 stock is still growing earnings by more than 15%. In other words, this looks less like a business problem and more like a popularity problem.
Back to the Pond
The duck, for what it’s worth, isn’t panicking. All that activity below the surface isn’t a sign of trouble; it’s just how a duck moves forward. The market works much the same way. Beneath every calm-looking index, there’s rotation, repricing, and the occasional casualty.
Our job isn’t to guess which of those ripples turns into a wave. It’s to make sure the portfolio is built to keep moving forward, no matter which stocks happen to be doing the work.
And if that wasn’t enough, here are a few interesting facts as well. Enjoy.
Consumer Stocks Down the Drain. On 9/9, the combined weight of Consumer Discretionary and Consumer Staples in the S&P 500 hit a record low of 13.3%, down from a 1992 peak of 30.8%. Staples’ weight of 4.4% has never been lower.
Wait…O.K., now Go. The Nasdaq’s record close on 9/21 was its first since June 2nd. In 13 prior droughts of between 3 and 12 months without a record (and no drop of more than 15%), the Nasdaq rose in the month after every time, with a median gain of 2.3%.
Trick or Treat? Since 1945, the S&P 500 has averaged a 1.0% gain in October. In midterm years, that improves to 2.8%. But in years when the index was up 10%+ through September, October has averaged a 0.1% decline.
Sub-1% Yield. The State Street SPDR S&P 500 ETF’s (SPY) dividend yield dipped below 1% in May for the first time since 2001 and ended August at 0.99%. Moreover, the yield now sits at its lowest level relative to the 10-Year Treasury Note since June 2002.
Where are the Engineers? Job postings on the employment website Indeed were down 1.4% YTD through 8/21. While the overall number of postings has changed little, sectors like Mechanical, Industrial, and Electrical Engineering have all seen a 15%+ increase.
Blast from the Past. Toys R Us, the previously bankrupt but nostalgia-inspiring toy store of my youth, is opening 120 new standalone locations this holiday season to serve increasing toy and collectibles demand from adults. Toy sales for adult-only households grew more than those for households with children in the first half of 2026, while teens and adults accounted for nearly 60% of the industry’s sales growth.
Markets / Economy
- Markets continue to exhibit volatility, with a bit of a whipsaw this week. The S&P finished the week down -0.3%, the Nasdaq up 0.5%, and the small-cap Russell 2000 down -0.2%.
- Core PCE rose 0.2% MoM in August, below the 0.3% rise markets expected. The latest reading followed a downward revision to July’s figure, with the monthly increase now estimated at 0.1%.
- The U.S. economy added 29K jobs in September, following a downwardly revised 133K in August and well below forecasts of 90K. The weak numbers drove a positive day in the markets, as rate hike expectations took a step back.
- U.S. unemployment rose to 4.2% in September, up from 4.1% in August and slightly above market expectations of 4.1%.
Stocks
- U.S. equities were in negative territory. Healthcare and Financials led the decline, while Technology and Energy outperformed. Growth stocks led value stocks, and small caps beat large caps.
- International equities closed lower for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased 11 basis points to 5.28% during the week.
- Global bond markets were in negative territory this week.
- Government bonds led for the week, followed by corporate bonds and high-yield bonds.
