Q3’24: The Year So Far

After a record run in September, stocks ended solidly up year-to-date: the S&P 500 at +22.1%, Nasdaq up +21.8% and even the Dow up a respectable +13.9%.[i]. Since then, Nasdaq has continued higher at +23.7%, the S&P is flat while the Dow is down to +12.5%.[ii]

This follows a big year in 2023 as well when the S&P 500 was up even more at +24% and the Nasdaq a whopping +43%.[iii]

What started in 2023 was the growing conviction that the Fed would stop raising rates as evidence that the aggressive rate hikes of ’22 were working.[iv] Meaningful progress on inflation and the lingering fears of recession brought one last interest rate hike in July of ’23: and at just ¼ of 1%.

In 2024, recession fears have finally been put to rest – a view we never shared — given strong economic data – positive job and wage growth albeit moderating, low unemployment at 4.1%, consumer spending and savings healthy — while CPI inflation continues down from a high of 9%[v] in mid-’22 to 2.4%[vi] right now.

The post-covid re-balancing of supply and demand is finally normalizing, a fact Fed Chair Powell has emphasized for some time now, signaling over the summer that rate cuts were coming as early as September. When the unexpectedly large cut of half a percentage point came in mid-September, the first cut since 2020[vii], stocks took off, again, anticipating more cuts to come.

For now, markets seem to have largely discounted continued Fed easing with investors expecting another ¼ to ½ percentage cuts before year-end. Valuations are at the high end of their historical range at 21.7x forward earnings (vs. 19.6x 5-year average),[viii] yet the prospect of continued Fed easing and strong earnings provides underlying support for the market. We remain fully invested with expectations of a continuing bull market in stocks.

Geopolitical unrest in the Middle East and Ukraine continue to warrant close monitoring while the uncertainties of next week’s Presidential election have kept some investors on the sidelines.

Typically, the stock market moves higher in a presidential election year and moves even higher into year-end once the uncertainty of the election removed, no matter who wins. Some sector and stock rotation are likely to occur once president and party of both Congressional branches are known as investors handicap probabilities for action affecting various industries.

As the CIO of BD8 Capital Partners, I appear on CNBC weekly to talk about stocks and the stock market, as well as on other news outlets, and we post frequently on “X” (Twitter), LinkedIn and our BD8 Cap Facebook page so you can follow our market commentary. Our website also has updates and information about the firm.

As always, we at BD8 Capital Partners continue to focus on your long-term financial future and planning needs, while managing your investments to help meet your financial goals.

Please never hesitate to contact us with any questions or concerns at any time.

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[i] https://www.nasdaq.com/articles/third-quarter-2024-review-and-outlook
[ii] https://www.cnbc.com/quotes/.DJI?qsearchterm=dow%20jones
[iii] ttps://fortune.com/2023/12/29/stocks-2023-sp-nasdaq-soaring-economy/
[iv] https://www.bls.gov/opub/ted/2023/consumer-prices-up-3-2-percent-from-july-2022-to-july-2023.htm#:~:text=The%20Consumer%20Price%20Index%20for,energy%20prices%20decreased%2012.5%20percent.
[v] https://www.pbs.org/newshour/economy/u-s-inflation-at-9-1-percent-a-record-high
[vi] https://www.bls.gov/cpi/
[vii] https://www.cnbc.com/2024/09/18/fed-cuts-rates-september-2024-.html
[viii] https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_102524.pdf