Quarterly Newsletters
Quarterly Newsletter for the 3rd Quarter 2024
Characterized by robust economic growth, declining inflation and notable shifts in market sentiment, the third quarter of 2024 provided positive results. On a return price basis, as of September 30, the Dow Jones Industrial Average (DJIA) was up 8.21% for the quarter and 12.31% for the year to date. The Standard and Poor’s 500 (S&P 500) was up 20.81% for the year and up 5.53% for the quarter and the NASDAQ was up 21.17% for the year and 2.57% for the third quarter of 2024. The MSCI All Country World ex-US Index turned in an impressive 7.36% for the quarter and 11.69% year to date. In the fixed income environment, the Merrill Lynch 3-month Treasury Bill Index yielded 1.37% for the quarter and 4.03% for the year, while the Bloomberg Aggregate Bond Index return is now up 4.45% for the year as it gained 5.20% during the third quarter.
Fixed Income Market (Bonds): The Federal Reserve remains the key to the future of the fixed income market and a very important influence over the future of the U.S. stock market. The Fed entered its long-awaited interest cutting mode in September, lowering the Fed Funds rate by 50 basis points (0.50%). Many more cuts are expected. Economic data, led by strong retail sales, a drop in jobless claims and strengthening GDP (Gross Domestic Product) reveals a very resilient economy. The possibility of a soft landing is becoming more and more a reality. Inflation data is coming in at an encouraging rate and is meeting or exceeding expectations. This gives the Federal Reserve the ability to keep adjusting interest rates downward, aligning with market predictions calling for significant cuts by mid-year 2025.
US Equity Market (Stocks): U.S. corporate earnings continue to be strong and consumer spending, accounting for 70% of the current U.S. economy, is resilient. The VIX Index (volatility index) is hovering around 20 (indicating that there is a certain amount of volatility, but nothing extreme). These factors are not a backdrop for a bear market. About 80% of the S&P 500 companies exceeded their third quarter earnings expectations and all the sectors, except the energy sector, had positive performance for the quarter. The most notable performance came from the utilities sector (up about 19%), as well as the real estate sector (up 17%). We are in the final stretch of the election season and the polls have the presidential race at a dead heat. As we have stated previously, the investment market hates uncertainty, and this election presents us with a fair amount of that. Ultimately, the markets prefer policy stability, less regulatory pressure and would welcome the extensions of the tax cuts set to expire in 2026. While geopolitical risks remain, we have a strong economy, we have strong consumer spending, we have strong corporate earnings, and we have a Fed that is cutting interest rates. These are all positive for the continuation of a bullish market into year end.
Overseas Equity Market (Stocks): Geopolitical pressure remains prevalent around the world. The wars in Israel and Ukraine continue to be a concern. Surprisingly, China appears to be a star performer for the third quarter. Recent news of China’s fiscal and monetary stimulus was surprisingly robust and gave Chinese equities a positive boost. The Hang Seng Index finished up over 19% for the quarter, bringing its year-to-date return in at 24%. Steller performance in other countries such as Taiwan, India, Germany and Canada are driving the robust overseas market. Central banks around the world seem to be continuing their accommodative stance as they are slowly lowering interest rates to control inflation.
Conclusion: We expect volatility leading into the election but think the U.S. stock market will remain resilient and produce positive results through year end; thus, we remain confident about the U.S. stock market. The Fed, we feel, will continue to lower interest rates and this will be a plus for the fixed income market; thus, we continue to favor the intermediate term fixed income markets. Finally, on the overseas front, we continue to remain positive on developed international stocks and think that emerging markets may be appropriate for a percentage of one’s portfolio- should it meet your risk tolerance.
In closing, permit us to express our sincere appreciation for the opportunity to be of service to you. As always, should you have any questions or wish to discuss the above in more detail, please do not hesitate to contact us.