Q3 -- 2024 Traditional Weakness
Q3 is almost in the books and the traditionally weak September is not living up to its billing as the worst month of the year as the S&P 500 is actually up 1% so far this month.
The main reason seems to be that the markets think the Fed is going to navigate us into a “soft landing” and that while the US economy shows signs of cooling, it is not heading towards a dramatic downturn. Instead, a careful recalibration of interest rates by the Fed could help sustain growth and alleviate potential pressures, making the next few months critical for policy direction, economic stability and the market’s behavior. If you dig a little deeper, this is where the debate about rising recession risks rears its head. Over the last three months, nonfarm private payrolls have averaged monthly gains of just 96,000 - fresh lows. And going back the past year, actual employment has been revised down by over 1MM jobs. Suffice it to say, the labor data is looking decidedly soft. Furthermore, if things are so rosy, why is there a need for a half percentage point cut. That’s usually the remedy for a recession – not an economy that’s humming along. When thinking about how low interest rates can potentially go during the cutting cycle, it does seem like we're not going back to the "old days" (under 3% mortgages) any time soon.
Markets drop. Bear markets arrive. That's an unavoidable part of investing. What matters is how you respond. Good planning and discipline along the way, is like a pre-emptive relaxant - it can help neutralize some of the nausea before the turbulence hits. On a broader scale, the equity markets have remained resilient, particularly favoring value and dividend-paying stocks this quarter. This nascent trend may gain momentum as the Fed begins to implement its rate cutting cycle, enhancing the attractiveness of these equities relative to bonds.
The good news? We can stop worrying about how elections will affect our investment portfolios. Whichever side we’re on in politics, the “wrong side” winning has yet to result in immediate catastrophe for the markets.
Whoever wins, we should expect more volatile markets pre and post-Election Day. That’s been a consistent theme in the two dozen presidential races going back to 1928. And if there’s anything that even Harris and Trump voters can agree on, it’s that this election will be close. Buckle up for what may be an interesting finish to 2024.
Are most tech workers jealous of Nvidia? Wondering why people say California is expensive – this is a great infographic showing the value of $100 across the nation. Are we going back to sailing ships to transport cargo? Looking ahead to 2025, will you be required to return to your office?
Nick
PLAN WELL, INVEST WELL, LIVE WELL.
HELPING CLIENTS GROW AND PRESERVE THEIR WEALTH.