Defensive 'slumps' ahead of Jackson Hole were the expectation.

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What's a bit more interesting was how the S&P held nearly precisely at the standard deviation 'mean' I mentioned, which was around S&P 4150. Oil & China too are significant factors to contemplate beyond this week's Fed gathering.

This Fed may pivot, actually they will pivot, the only question is when. If data is the key, then while the Fed is not forced to do anything particular varying in their hawkish approach given inflation still at high levels, however that lets the inflation rather than the backdrop (with forecasting abilities) dominate thinking.

The economy is slowing down by most measures, the technical aspects for the stock market bottomed in June, and the Fed also has a 'mandate' not just for price stability, but 'employment'. Having job losses pick-up ahead of these upcoming midterm elections is not politically palatable, unless one view it as a heck of a way to help the somewhat-logical Republican sweep (cynically that's a reminder that the Fed Chairman and some others happen to be Republican) . . . although I'd never suggest that would sway their policy leanings :) 

In-sum: 

Monday's decline (led by Apple) and jitters about the Fed were just a fairly orthodox post-Expiration drop and psychological bantering about the Oil risks (Iran and Russia), plus Europe sliding deeper into recession, and a key part of decline we anticipated: defensive ahead of the Jackson Hole meeting.

OPEC is an issue. Russia is an issue. Biden courting Iran is an issue. Drought is an issue. Now floods and hurricanes 'may' become issues. It's late Summer in a tight liquidity market (the Saudi's claim) make it hard to hedge Oil needs, but I don't trust the Saudi's and I suspect Congress will oppose our signing-on early to an Iran deal. So that also makes it tough to project Oil (in an expected range for the moment).

Europe is facing a nightmare, and Russia can ease or worsen it (well I needn't emphasize my warnings to Germany years ago by given Russia leverage). If Russia is going for 'mutual assured destruction' by 'really' turning-off Natural Gas, well, that's a real problem and that too is part of flight 'capital flight' into the U.S. Dollar. 

There is a fiction going on, because the United States can be independent, at the same time Europe cannot depend on their own Oil & Gas (to great extent) but is engaged in a project to get more from Canada relatively easily. For now no change in our Oil view: that it would fluctuate in the 80-90's for awhile. 

As to inflation, the shock seems to still dominate boardrooms, the EU finance ministries and our own Fed. Natural-gas prices surging again today mostly as concern of further disruptions to supply from Russia. But in one crucial area, prices have come back to Earth. The cost of grains, and other staples of diets around the world, have returned to levels last seen before Putin's war began.

Monday's sell-off was 'not' surreal, as there are reasonable differences in view as to how inflation (and slower growth) would impact a multiple for the S&P in 2023. Given relatively low interest rates (even now), 'probably' not as low as a few suspect. The idea we have continues to believe the recession is ongoing, that it primarily is behind rather than ahead, and that inflation won't retrench in a grand way, but sufficiently for the Fed to calm down sooner than later...if in fact they wish to anticipate reality rather than continue merely to be reactive.

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