Q3 2024 Market Review
By Clint EdgingtonPosted on October 8th, 2024
Equity and fixed income markets both experienced broad gains this quarter, with the S&P adding nearly 6% to its 22% year-to-date gain and the U.S. aggregate bonds’ quarterly performance of 5.2% swinging bonds into positive territory with a 4.5% annual return.
While market performance was positive, the path has left many investors feeling like it was not. The markets generally ended last quarter on a positive note with expectations of looser monetary policy. From mid-July to early August, however, the market dropped swiftly, almost enough to be considered a correction at around 8%. However, from early August on, hopes of a larger interest rate cut jumped after the July nonfarm payroll was considerably below expectations with only 114k jobs added. Chairman Powell further signaled aggressive rate cuts in his August 23 Jackson Hole speech.
“After a pause earlier this year, progress toward our 2 percent objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2%….Today, the labor market has cooled…unemployment began to rise over a year ago…Most of that increase has come in the last 6 months….the time has come for policy to adjust”
Finally, on September 18, 2024: FOMC statement lowering federal funds rate .5%.
“The committee has gained greater confidence that inflation is moving sustainably towards 2 percent…”
The drop in interest rates propelled interest rate sensitive areas that have struggled lately. Real Estate led the way this quarter, swinging out of the negative territory for the year, and Value handily outperformed Growth.
International and emerging markets were buoyed both by U.S. interest rate news as well as Chinese stimulus as well, with a 13.5% and 17% return, respectively.
Eye on the Quarter Ahead
The Federal Reserve does not meet in October, so there will be some time to determine the impact of the September 50 basis point rate cut. Of course, all eyes will focus on the results of the presidential and congressional elections in November.