“The big money is not in the buying and selling, but in the waiting.”
-Charlie Munger
Here’s what you need to know this week:
- Stocks close the third quarter in the green, marking the fourth positive quarter in a row
- Investors await a slew of employment data
- Markets head into an unusually busy fourth quarter
Green Streak
The third quarter of the year has ended and stocks once again posted impressive gains. The Dow Jones was the strongest index this quarter with an 8.2% gain; the S&P 500 posted a 5.4% quarter and the NASDAQ delivered a respectable gain of just under 3%[1]. These gains marked the fourth consecutive quarter of gains for stocks, and seven positive quarters out of the last eight:
This has been an impressive year for stocks thus far. As of writing, the S&P 500 has gained a little more than 21% year-to-date, making this the strongest first three quarters for stocks since 1997:
We still have to contend with the fourth quarter of course, but so far 2024 has given investors plenty to celebrate.
Next Rate Cut
We are only two weeks out from the Federal Reserve’s 50 basis point (0.50%) rate cut, but investors are already looking ahead for clues as to the next rate cut. The Federal Open Market Committee (FOMC), the governing body of the Federal Reserve that determines interest rate policy, holds their next meeting on November 6th-7th, just after the presidential election. The bond market is currently assigning a 64% chance of a 25 bp (0.25%) rate cut and a 36% chance of a 50 bp cut[2], but investors are parsing economic data and comments from Fed officials for any potential clues as to the Fed’s next move.
Federal Reserve Chairman Jerome Powell spoke at the National Association of Business Economics on Tuesday and made guarded remarks as usual. He said that he is confident that inflation will reach the Fed’s target of 2% annualized, but added “we are not on any preset course”[3]. Powell has repeatedly emphasized that the FOMC will make decisions based on data related to the Federal Reserve’s dual mandate of controlling inflation and unemployment, so analysts are paying close attention to data than can provide insight into those two factors.
On the inflation side, last Friday saw the release of the most recent Personal Consumption Expenditures (PCE) report, the Federal Reserve’s preferred measure of inflation. This report showed monthly inflation at 0.1% and annualized inflation at 2.2% for the month of August. This was a clear decline from July’s annualized rate of 2.5% and lower than the 2.4% that analysts expected[4]. With inflation all but vanquished, many expect the Federal Reserve to turn its attention to unemployment.
Yesterday we received the Job Opening and Labor Turnover Survey (JOLTS) for the month of August. This report showed job openings at 8.04 million, an increase from July’s 7.71 million and higher than analysts’ estimates of 7.682 million[5]. This is usually a sign of a strong economy because it means more employers are hiring. This Friday we will receive the nonfarm payrolls (NFP) report for September, and analysts expect the report to show unemployment holding steady at 4.2%. If unemployment comes in at or under 4.2% then the odds of a 25 bp rate cut in November will probably increase.
Wall of Worry
This year’s fourth quarter kicks off with an unusually high amount of market-impactful events happening at the same time. Recovery efforts for Hurricane Helene have only just begun and are estimated to cost the federal government up to $160 billion, making it one of the most costly hurricanes in US history [6]. The International Longshoreman’s Association (ILA) officially went on strike yesterday morning, shutting down activity at ports all along the Eastern Coast. Middle East tensions continue to rise with Israel initiating a ground invasion into Lebanon and Iran firing missiles at Israel in response.
There are always reasons to be concerned about investing, and in our industry we term these reasons “the wall of worry”. However, the stock market always scales this wall of worry in time and rewards investors who stay the course. This year alone has seen growing conflict in the Middle East, Russia’s ongoing war with Ukraine, persistent inflation, a contentious presidential election and the highest interest rates in 20 years, and stocks have still posted a banner year. Like the quote says at the top, the big money is not in the buying and selling, but in the waiting.
What Else
- Former president Jimmy Carter became the first ever US President to reach age 100 yesterday
- Vice Presidential candidates J.D. Vance and Tim Walz squared off in their first and only debate last night
- Forecasters say a tropical depression in the Atlantic may develop into a hurricane later this week, threatening the recovery efforts in the wake of Hurricane Helene
- Legendary country singer Kris Kristofferson passed away at the age of 88
- OSU plays West Virginia this Saturday at 3:00 PM on ESPN2
- OU is on a bye week
What We’re Reading
Hurricane Helene has been one of the most damaging and deadliest hurricanes in recent memory, causing widespread flooding in five different states. Click below to read the latest on the storm and recovery efforts, as well as a tropical depression in the Atlantic that may develop into a hurricane later in the week:
What’s Happening Downtown
Pumpkinville at the Myriad Gardens kicks off this Saturday, October 4th and runs through October 20th. This event features pumpkin painting, pumpkin carving, educational classes, story time and other family friendly events along with local vendors and food trucks. Tickets are $9 and is free for children ages 2 and under. Click below to learn more:
Written by: Kane Ogle, CFP®
Steve Beck, Amber Eduvigen, CFP®, Kane Ogle, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess, Anne Boone
Sources: [1] Yahoo! Finance [2] CME Group [3] Bloomberg [4] Reuters [5] CNN [6] Bloomberg