September 2024 Market Review & Commentary

We trust that you are in good health and have relished the past few rainless days, which we have been eagerly anticipating. Our family is extremely excited for our annual journey to Bar Harbor, Maine, which we will depart for this Wednesday, and I will be returning into the office on Tuesday, October 15th. Please be aware that the office will be closed on Monday, October 14th in observation of the Federal Holiday.

We must express our sincere best wishes to all those impacted by Hurricane Helene and the resulting devastation. We are in contact with clients in areas that may be affected, and we send our hopes for the well-being of your loved ones, friends, and emergency responders in these affected regions. As Hurricane Milton approaches Florida later this week, our thoughts and prayers are with everyone in its path.

Third Quarter (July-September 2024) Review:

In the third quarter of 2024, the Federal Reserve initiated the process of returning interest rates to more typical levels following a tumultuous five-year period. To summarize, the Fed reduced interest rates to near-zero levels during the COVID pandemic to bolster the economy. It maintained rates close to 0% until March 2022, when it commenced increasing interest rates in reaction to surging inflation. Between March 2022 and July 2023, the central bank raised rates by +5%, marking one of the most substantial and swiftest rate hikes in recent memory. Subsequently, the Fed maintained interest rates unchanged for over a year while awaiting inflation to reach its 2% target. After 14 months, it initiated a cycle of rate cuts with a reduction of -0.50% during its September meeting. With no meeting scheduled for October, a critical question for the Fed and investors is the significance of the labor market softening over the past year. Is the labor market merely readjusting after substantial disruptions during the pandemic, or does it indicate an early indication of weakened labor demand? Answers may be forthcoming during the remaining two meetings this year (November and December), potentially involving further rate reductions.

In the stock market, despite some volatility, including a brief sharp decline in early August, stocks ended the quarter higher. The S&P 500 achieved its fourth consecutive quarterly increase and closed September near a record high. As the election approaches, you might be contemplating how the results will influence financial markets and whether you should adjust your investment approach. While political opinions can evoke strong feelings, basing investment decisions on such sentiments can result in suboptimal portfolio choices. Evidence indicates that the party in power at the White House has minimal to no impact on investment performance, as fundamental factors such as corporate earnings growth and valuations have a far greater influence on the stock market than political news. The success, growth, and resilience of the U.S. economy remain consistent across different administrations, and thus, your long-term investment strategy should not be altered with each election cycle.