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Stock Market Insights
October 17, 2024

Quarterly Market Insights: October 2024

Market Insights
This article is brought to you by Wealth Management by CommunityAmerica, courtesy of FMG Suite.

U.S. Markets

Investors welcomed the Fed’s decision regarding short-term interest rates, causing stocks to post solid gains in the third quarter.

 

The Dow Jones Industrial Average, which dipped in Q2, picked up 8.21 percent for the third quarter. The S&P 500 Index rose 5.53 percent while the tech-heavy Nasdaq Composite gained 2.57 percent as investors rotated away from technology names in favor of other groups (See Sector Scorecard).1

Small Caps Shine in July

Stocks were mixed in July despite economic data that seemed to mark a turning point in the Fed’s view on interest rates. Investors eventually became more confident that inflation was slowing as anticipation built around a potential rate adjustment.2

 

The improving inflation outlook sparked a rally in the Russell 2000, which gained more than 10 percent in July. Investors anticipated small caps might benefit if the Fed adjusted rates.3,4

Twin Inflation Reports in August

August began with a disappointing employment report showing that job growth in July slowed more than expected, and unemployment increased to 4.3 percent—the highest rate since October 2021. On the same day, Japan's Nikkei dropped on concerns about a trading strategy called a “carry trade,” which briefly pressured global financial markets.5,6

 

But stocks rebounded mid-month as fresh economic data also bolstered confidence. The Producer Price Index (PPI) and the Consumer Price Index (CPI) rose less than expected in July, reinforcing the “cooling inflation” narrative. The July retail sales report was stronger than expected, which also helped boost sentiment.7

 

Later in the month, Fed Chair Jerome Powell, in his Jackson Hole symposium speech, indicated the time had come to adjust monetary policy, which was considered welcome news by investors.8

The Fed's Bold Move in September

In September, markets were volatile as investors waited for an update on interest rates following the Fed’s two-day meeting. Early in the month, weak manufacturing data and mixed jobs data reawakened recessionary fears, which put pressure on stocks and led to the S&P 500 posting its worst week since March 2023.9,10,11

 

Stocks initially fell when the Fed announced it was cutting interest rates by 0.5 percent—the first reduction in four years—but then rallied. The Dow topped 42,000 for the first time, while the S&P crossed the 5,700 mark. The 0.5 percent cut surprised some, who anticipated the Fed would be more cautious during an election year.12,13

Sector Scorecard

All but two sectors of the S&P 500 were positive for the quarter, reflecting broad market strength.

 

Utilities (+18.55 percent) and Real Estate (+16.30 percent) led, with Industrials (+11.13 percent), Financials (+10.24 percent), and Materials (+9.14 percent) in the next tranche down. Consumer Discretionary (+9.85 percent) and Consumer Staples (+8.38 percent) also delivered solid gains, while Communications Services (+5.53 percent) and Health Care (+5.67 percent) kept pace with the S&P 500. Energy (-3.69 percent) and Technology (-0.21 percent) were the only sectors that declined over the quarter.14

What Investors May Be Talking About in October

In the month ahead, expect some attention to start shifting to the housing market now that Fed Chair Powell has confirmed that “the time has come for (monetary) policy to adjust.”

 

Mortgage rates have been trending lower since hitting a peak in October 2023. Loan rates may continue to move lower since Powell said that “the direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”15

 

There is a group of existing homeowners who may have delayed mortgage decisions in recent years because they don’t want to leave a low-interest rate home loan. If mortgage rates trend lower, some homeowners may reach a higher level of comfort making a move.

World Markets

The MSCI EAFE Index rose 6.65 percent during Q3, benefiting from easing monetary policy in many central banks.16

 

European stocks rallied in Q3, with Spain (+8.53 percent) and Germany (+5.97 percent) notching solid gains. France, the UK, and Italy rose, but the gains were modest.17

 

Among emerging markets, Egypt rose 14.77 percent, and Brazil picked up 6.38 percent. On the Pacific Rim, China’s Hang Seng index rose 19.27 percent, which led the group. Other markets were mixed, with Australia picking up 6.47 percent while Japan’s Nikkei slipped 2.35 percent.18,19

Indicators

Gross Domestic Product (GDP)

The third estimate of GDP showed the U.S. economy grew 3.0 percent on an annualized basis in Q2, unchanged from the second estimate and higher than the initial 2.8 percent estimate. The final estimate was slightly higher than economists’ expectations of 2.9 percent growth and more than double the first quarter’s 1.4 percent annualized pace.20

Employment

Job growth rebounded in August. Last month, the 142,000 jobs added by employers was weaker than the 161,000 economists expected but higher than the downwardly revised job gains of 89,000 in July and 118,000 in June. Unemployment slid to 4.2 percent in August. Wage growth increased by 0.4 percent month-over-month and rose 3.8 percent over the prior 12 months.21

Retail Sales

Consumer spending inched up 0.1 percent in August over the prior month, above economists’ expectations. Retail sales increased 2.1 percent year-over-year.22

Industrial Production

Industrial output rose 0.8 percent in August—the largest increase since May—driven by a recovery in motor vehicles and parts. The increase topped economist expectations.23

Housing

Housing starts rose 9.6 percent in August—the highest level since January 2007. The increase was driven by new single-family home construction and falling mortgage rates.24

 

Sales of existing homes fell 2.5 percent in August as prospective homebuyers appeared to be taking a wait-and-see attitude despite lower mortgage rates and higher inventory. Sales dropped 4.2 percent from a year earlier. The median existing-home sales price was $416,700, up 3.1 percent from a year prior.25

 

New home sales fell 4.7 percent in August, which was a turnaround from July’s 10.6 percent month-over-month gain. The median new home sales price was $420,600, down 4.6 percent from a year prior.26

Consumer Price Index (CPI)

Consumer prices rose 0.2 percent in August and 2.5 percent from a year earlier, slightly milder than economists expected and cooler than July’s 2.9 percent annualized pace. It was the CPI’s lowest level in more than three months and marked the fifth straight month of cooling inflation. Core CPI, which excludes food and energy, grew at 3.2 percent on an annualized basis, which was in line with expectations.27

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer were unchanged in August, besting expectations for a 2.6 percent decline. The largest drag on orders was civilian aircraft, which pulled down the whole transportation sector by 0.8 percent. Excluding civilian aircraft, durable goods orders rose 0.5 percent in August.28

The Fed

The Federal Reserve cut interest rates by a half percentage point at its September 17–18 Federal Open Market Committee (FOMC) meeting, bringing the Fed Funds target range to 4.75 percent to 5.0 percent. It was the first change in the Fed Funds in 14 months and the first cut in short-term rates in 4½ years.

 

A majority of FOMC voting members also indicated that rates may adjust at the two remaining Committee meetings in 2024. Still, Fed Chair Powell, following the meeting, told the National Association for Business Economics that “we are not on any preset course."29

 

The Fed’s September decision reflected “greater confidence that inflation is moving sustainably toward 2 percent" and that the "risks to achieving its employment and inflation goals are roughly in balance."30

By the Numbers: Pumpkins 

  • The total weight of pumpkins grown in the U.S. last year: 1.6 billion lbs31
  • The size of the largest pumpkin produced: 2,749 lbs32
  • The size of the largest pumpkin pie ever produced: 3,699 lbs33
  • The portion of pumpkin made up of water: 90%34
  • The portion of pumpkin crop available in October: 90%34
  • The world record for the fastest 100 meters paddled in a pumpkin: 120.3 seconds34
  • The number of people who carved a pumpkin last year: 154 million35
  • The amount of calories in a cup of pumpkin: 30 calories36
  • The number of varieties of pumpkin in the world: 150+37
  • The amount of pumpkin produced per person every year: 6 lbs38
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About the Author
FMG Suite

FMG is an all-in-one marketing technology platform for financial advisors. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. FMG Suite is not affiliated with Copper Financial or CommunityAmerica. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, or state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

 

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

 

Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance.

 

The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.

 

The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

 

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and considered a broad indicator of the performance of stocks of technology and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark for the performance in major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

 

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

 

The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong Stock Exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on the Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile, & Futures Exchange. The IPC Index measures the companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 Index is an index of stocks listed on the Australian Securities Exchange. The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French Stock Market Exchange. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange.

 

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