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.
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