September was the first down month in markets since the March 23rd lows. The S&P 500 was the weakest of the major stock market indices we highlight in these updates, but the Russell 2000 and MSCI foreign indices were also lower. Investment grade bonds were modestly negative. Non-investment grade issues saw credit spreads widen modestly.
The market action in September was pretty interesting in our view. There was a lot of excitement over some stock-splits, which we wrote about at the end of August. We saw market leaders gap up in the beginning of the month, but sell off sharply. The S&P 500 nearly entered a correction, defined as a 10% drop from a closing high, while the tech-heavy Nasdaq did.
We think market corrections are both normal and healthy because they help keep animal spirits in check. As the market recovered from the March lows, investors became more confident and more brazen. We felt lonely in our optimism in early spring, but as it gets into fall we are feeling less isolated and there are times when it has felt crowded. From our perspective, a normal correction is a good thing as it helps reduce our claustrophobia.
There are plenty of issues for investors to worry about these days: elections, second waves of the virus, and uncertainty surrounding fiscal stimulus. We detailed our thoughts on these issues in our third quarter client letter. If you would like a copy please feel free to email us. While we share some of those concerns to varying degrees, we think the worries are a good thing. We tend to get concerned when investors stop worrying.