Stocks had a strong start to the third quarter before pulling back in August and September. Overall, the S&P 500 ended the quarter with modest losses, in part attributable to another spike higher in interest rates. In our opinion, the resilience in the US economy could be contributing to the recent market volatility. Although it may seem counterintuitive, good news on the economy sometimes translates into bad news for investment assets. This is because stronger-than-expected economic growth could make it harder for inflation to recede. Tamping down inflation has been the Fed’s main priority since early 2022, and it appears to be more than willing to risk a mild-to-moderate recession if it supports its goal to bring the rate of inflation down to its target rate of 2%.