ACG Market Review – Third Quarter 2024

(Download the full report HERE)

  • Economy – Growth remains strong, and inflation keeps cooling as the Fed begins cutting rates
    • Year/year GDP estimates for Q2 2024 are hovering around +3.0% as consumers kept spending in Q3 and the U.S. economy remained in a growth trajectory, despite some signs that the labor market may be slowing.
    • Inflation numbers continued to moderate near the Fed’s target, with a headline CPI reading of +2.6% from the prior year. Energy costs cooled during the quarter and were a net detractor from inflation readings.
    • The Federal Reserve cut their policy rate by 50 basis points in September in what markets expect to be the first in a series of rate cuts over the coming months. The Fed will be watching incoming data to attempt to balance labor market stability with keeping a lid on inflation going forward.  
  • Equity – Another strong quarter for stocks despite elevated volatility
    • The S&P 500 gained +5.89% in Q3 even after a spike in volatility due to some worse-than-expected jobs data and worries over an unwinding of the Japanese Yen carry trade.
    • U.S. stock performance broadened beyond the Magnificent 7, with the Small Cap Russell 2000 Index gaining +9.27% in Q3 and strong returns in International markets.
      • Stimulus measures in China towards the end of the quarter helped Emerging Market stocks, as the MSCI EM Index rose +8.72% in Q3.
  • Fixed Income – Bonds helped by falling yields as markets anticipated Fed easing
    • The 10-year Treasury yield fell from 4.36% to 3.81% during the quarter, helping the Bloomberg U.S. Aggregate Index to a +5.20% gain in Q3. Corporate bonds also enjoyed positive performance during the quarter as spreads remained tight.
  • Risks/Other Considerations
    • The U.S. Presidential election in November will continue to garner attention, but markets tend not to care much about election outcomes, especially over longer timeframes.
    • Geopolitical tensions remain high in the Middle East and will be closely monitored for signs of a broader conflict.

ACG Q3 Market Review

Download the full report HERE to see index returns and more:

  • Q3 2024: Markets Focus on Interest Rate Cuts
  • Pace and Magnitude of Cuts Come Into Focus
  • The Federal Reserve’s Balancing Act
  • Yield Curve Becomes “Normal”
  • What Will the Full Yield Curve Look Like Going Forward?
  • Comparing This Rate Cycle to Past Cycles
  • Treasuries Are Just One Part of the Fixed Income Markets 
  • How Do Equity Markets Typically React to Rate Cuts?
  • Equity Volatility Returned During Third Quarter
  • Earnings Growth Still Expected to be Strong and Broadening 
  • Defensives Outperform and Valuations Increase
  • Energy Prices Decline During Q3 Despite Geopolitics
  • U.S. Dollar Also Reacting to Prospect of Rate Cuts 
  • Commercial Real Estate Update

Sources:

  • Morningstar
  • ACG
  • Federal Reserve
  • Factset
  • Hedgeye
  • Bloomberg
  • Federal Reserve
  • Bureau of Labor Statistics
  • Institute of Supply Management
  • PIMCO
  • Blackrock
  • Charles Schwab
  • Nuveen
  • Verdad
  • Standard & Poor’s
  • Royce
  • Center for Research in Security Prices (CRSP)
  • CBOE
  • NASDAQ
  • LPL Financial 
  • Srategas
  • Citigroup
  • Morgan Stanley
  • Gavekal Research
  • MacroBond
  • Energy Information Administration
  • JP Morgan
  • Research Affiliates
  • Bank of America