A Step Ahead

As we approach the end of 2024, it's important to review the significant economic developments that occurred during the third quarter. Understanding these trends can help you make informed financial decisions moving forward. Here's an overview of the key highlights. S&P 500: Four Straight Positive Quarters The S&P 500 has recorded four consecutive positive quarters, marking an impressive run with seven of the last eight quarters in the green. This performance has rewarded long-term investors despite concerns over inflation, rising interest rates, and even the possibility of a government shutdown. Notably, for the third quarter of 2024, the S&P 500 rose by 5.53%, while the Nasdaq 100 increased by 1.92%, and the Dow Jones Industrial Average jumped by 8.21%. Economic Outlook: Inflation and Labor Market Concerns Expectations of lower interest rates, combined with declining inflation, were a major theme during the third quarter. The Federal Reserve’s decision to cut rates by 50 basis points signaled a “recalibration,” aimed at stimulating the labor market rather than responding to a struggling economy. While inflation has decreased in recent months, with the Consumer Price Index (CPI) showing lower annual inflation rates, labor market data raised concerns. A notable revision in previously reported job figures revealed a reduction of 818,000 jobs over the preceding year. This slowdown in job creation may indicate a softening labor market as we move forward into the final quarter. Volatility and Market Reactions Despite the overall positive performance of the markets, the third quarter was not without volatility. August saw a spike in market turbulence, largely due to global factors such as the Japanese Yen carry trade. However, this volatility dissipated quickly, with the S&P 500 Volatility Index ($VIX) calming down by the first week of August. Labor market concerns and early September volatility led to some uncertainty, but the Federal Reserve’s decision to cut rates again helped to stabilize markets. The focus now is on whether these rate cuts will lead to stronger employment figures in the coming months without reigniting inflation. Fed Outlook and Treasury Yields At the end of the third quarter, markets were pricing in further interest rate cuts for 2024. The Federal Reserve is expected to make an additional 25 to 50 basis points of cuts in the coming months, with inflation data remaining a key determinant of future rate decisions. Another major development was the normalization of the 2/10 yield curve in September, ending its longest inversion in history. While some view this as a potential recession signal, others interpret it differently, leaving room for debate about the broader economic outlook. Looking Ahead As we move into the final quarter of the year, market trends remain heavily influenced by Federal Reserve policies and the upcoming election cycle. Long-term investors should remember that despite the noise of headlines, steady investment strategies continue to yield results. Schedule a Consultation with Clare Market Investments, LLC  If these third-quarter market developments have you wondering about how to position your investments for the future, we're here to help. Schedule a consultation with Clare Market Investments, LLC, and let’s discuss strategies to secure your financial future.

We hope you and your loved ones are doing well! Today, we’d like to share some key insights into the market developments that took place in August, with an eye toward what might be on the horizon as we move into the fall. Fed's September Meeting Looms Large August was largely driven by expectations for the Federal Reserve’s next move at its September policy meeting. Following a quick volatility spike due to the Japanese Yen carry trade unwind, all eyes turned to the Fed. Markets are now looking at the possibility of lower interest rates as a positive development. Performance of Major Stock Indexes Inflation data in August aligned with the Federal Reserve’s stated goals, supported by cooperative indicators like the Consumer Price Index (CPI), Producer Price Index (PPI), and the Core PCE Price Index. Here’s how the major stock indexes performed over the month: S&P 500: Up by 2.28% Nasdaq 100: Down by 1.10% Dow Jones Industrial Average: Up by 1.76%, hitting a fresh all-time monthly closing high Inflation Continues to Cool The cooling trend in inflation persisted throughout August, offering more support for the idea that the Fed has succeeded in taming inflation. This has added fuel to the case for upcoming rate cuts, with many now seeing September as a near certainty for the first cut. The only question is whether it will be 25 or 50 basis points. The Consumer Price Index data reflected this cooling, with the annual inflation rate slowing to 2.9%, the lowest since 2021. Falling Government Bond Yields In the bond market, the benchmark 10-year note yield fell for the fourth consecutive month in August, dropping by about 19.8 basis points and finishing the month at 3.912%. When bond yields fall, bond prices rise, which has been good news for fixed-income investors. Whether you've held bonds for a long time or decided to invest over the last year as interest rates climbed, the recent drop has likely provided some benefit. It’s worth remembering that today’s interest rates, while high compared to recent years, are still lower than historical peaks. For instance, 30-year mortgage rates topped 17% in the early 1980s. Labor Market Data: A Shift in Focus The labor market showed signs of slowing in August. Employers added 114,000 jobs in July, a sharp decrease from June. The unemployment rate ticked up to 4.3%, suggesting some softening in the broader labor market. What Does It All Mean for Investors? August started off with volatility, but things quickly calmed down. However, as we move into September, it’s worth noting that this is historically the most volatile month of the year. Combined with the added uncertainty of an election year, we may see increased activity in the markets. For long-term investors, the key is to remember that market cycles are normal, and both expansion and contraction are part of the journey. Depending on your goals, there may be opportunities in fixed-income investments. For others, staying the course could be the right choice. Looking Ahead With these insights in mind, it’s a great time to reflect on your financial strategy. If you have any questions or are considering your options in the market, feel free to reach out to us. We’re always here to help! Wishing you a prosperous September! Stay Connected! For more updates and financial insights, be sure to follow and like our social media accounts to stay informed throughout the month.