September 2024 Market Recap – Riding the Market Wave: Why Patience Pays Off

September 2024 – Market Recap

"Riding the Market Wave: Why Patience Pays Off"

Ryan Potts – Portfolio Manager

Q3 2024 Market Performance Recap

The stock market continued to shine in the third quarter of 2024. The Nasdaq rose 7.2%, the Dow climbed 4.1%, and the S&P 500 increased by 5.5%, bringing its year-to-date gains to nearly 21%. This growth came amid strong corporate earnings and a 50-basis-point interest rate cut by the Federal Reserve “Fed” aimed at easing labor market pressures. Despite geopolitical tensions in the Middle East and Ukraine, which caused some oil price volatility, U.S. markets remained resilient, and investors are optimistic.

Sector Performance Highlights

Different sectors told varied stories this quarter. Technology stocks led early on, but chipmakers like Nvidia faced challenges and weighed on the sector. Meanwhile, Utilities, Real Estate, and Industrials surged due to renewed demand, while Healthcare and Consumer Staples remained stable, thanks to their defensive appeal during uncertain times. The Energy sector saw volatility as geopolitical events influenced oil prices, while Financials felt pressure from rate cuts. Defensive sectors like Consumer Staples thrived as investors sought safety.

Interest Rates and Economic Outlook

When the Fed cuts interest rates moving forward, they are cutting for one of two reasons.

1. To continue to lower rates as we navigate towards a soft landing. (slow rate-cutting environment) Or,
2. The Fed must cut to fend off a possible economic slowdown. (expedited cutting environment)

However, and possibly more importantly, the economic data continues to move in the right direction.

• Inflation is showing encouraging signs, with the Fed's preferred measure, Personal Consumption Expenditures (PCE) inflation, declining to 2.2% year-over-year in August, with many estimates for September’s numbers to remain steady.
• Meanwhile, Consumer Price Index increased by 0.3% from August, resulting in an annual inflation rate of 2.6% for last month.
• The economy has been resilient, with a solid GDP growth rate of 3.0% for the last quarter—compared to the modest growth rate of 1.4% in the first quarter.

If you add it all up, the US Economy remains resilient, and the odds of the Fed navigating a “soft landing” continue to rise.

Corporate Earnings and Profitability

The "Magnificent Seven" tech giants (Apple, Nvidia, Meta, Microsoft, Amazon, Google, Tesla) continue to dominate market gains, but participation from other sectors is growing. As earnings broaden beyond these leaders, diversifying portfolios away from concentrated names at the top remains a smart strategy. The long-term potential for growth is encouraging, even as market dynamics shift.

Key Takeaway: Stay the Course

As we wrap up Q3, it's crucial to remember that long-term investing pays off. Despite occasional market volatility and headline-driven fluctuations, patient investors are being rewarded. By staying invested during uncertain times, you position yourself for future gains. Stick to your long-term goals, and don’t let short-term noise derail your investment strategy.