Q3 2024 Market Review and Current Outlook
Executive Summary
Third Quarter 2024 Market Review
- U.S. Equity Markets: Resilient growth despite complex economic backdrop, geopolitical risks, and election uncertainty.
- S&P 500 Performance: Ended the quarter at an all-time high, up 22.1% year-to-date, marking the strongest start since the late 1990s.
- Major Events:
- Higher interest rates in Japan and Yen carry trade unwinding.
- Two assassination attempts on former President Trump and President Biden’s withdrawal from the race.
- Escalating Middle East conflicts and China’s market collapse and recovery.
- Federal Reserve’s surprise 50 basis point rate cut.
- Market Sentiment: Increased volatility and investor caution, reflected in the rising CBOE Volatility Index (VIX).
Market Returns for Significant Stock Market Indices
- S&P 500: Up 5.9% in Q3, 22.1% year-to-date.
- Dow Jones Industrial Average (DJIA): Up 8.7% in Q3, 13.9% year-to-date.
- NASDAQ Composite: Up 2.8% in Q3, 21.8% year-to-date.
- Russell 2000: Up 9.3% in Q3, 11.2% year-to-date.
- MSCI World Index: Up 6.5% in Q3, 19.3% year-to-date.
Sector Performance
- Energy: Only sector to decline.
- Technology and Communications: Underperformed.
- Small Value: Best performing area; large growth was the worst.
- Utilities and Real Estate: Top performers in Q3.
- Small Caps: Best sectors were Communications Services, Real Estate, and Financials.
Fixed Income Markets
- Bloomberg US Aggregate Bond Index: Up 5.2% in Q3, 4.4% year-to-date.
- Volatility: Driven by fluctuating economic expectations and the underlying level of risk being priced into the market.
- Interest Rates: Treasury yields fell, especially for shorter maturities, reflecting expectations of aggressive Fed rate cuts.
- Credit Spreads: Ended the quarter below where they began, indicating strong demand for yield-oriented instruments.
Commodities
- Oil: WTI oil fell 16% in Q3.
- Gold: Prices up 13.1%, strongest quarter since Q1 2016.
Strategy Performance
- General Performance: Strategies trailed benchmarks due to lower risk (value/cyclical) exposure but delivered solid absolute returns.
- Fixed Income: Underperformed in the quarter given the broad-based rally but continues to outperform year-to-date due to short duration profile and solid credit performance.
Economic/Market Outlook and Portfolio Positioning
- Equities: Cautiously optimistic outlook; focus on high-quality companies with sustainable growth catalysts which we believe should perform well in most market environments.
- Fixed Income: Manage interest rate risk with shorter duration securities; seek selective credit opportunities.
Conclusion
- Approach: Cautious but opportunistic, prioritizing high-quality investments and actively managing risks to navigate uncertainties and capitalize on opportunities.
Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary and require consideration of your unique objectives and financial situation.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted. Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All information is believed to be from reliable sources; however, Advisor Resource Council makes no representation as to its completeness or accuracy. Additional information, including management fees and expenses, is provided on Advisor Resource Council’s Form ADV Part 2, which is available upon request.
