Market Update October 2024

October 31, 2024

We are starting to see a pick-up in volatility in the U.S. stock market in the days leading up to the election. There is likely to be some nervous money selling and some fast money bets leading into and immediately following the election. Given the strong September and October we have seen, market participants may consolidate some gains and take some profits. We are nearing the end of earnings announcements for the quarter. Earnings have been strong, including Tech, regardless of the headlines around AI spending. There will likely be some sector and stock rotations following election results. We will make a few, moderate changes to stay in line with market leadership, depending on the results.

Also, next week is a FOMC meeting and policy rate decision on Thursday. The Fed at its previous meeting lowered rates by 50 bps and began an easing cycle. The lowering of rates boosts stock market returns by creating more favorable lending conditions for companies which leads to an increase in investing towards future growth and healthier profit margins. This is by far the biggest driving force behind stock market returns. The bond market did not react in accordance to how it usually would with a fed rate cut. Bond yields rose rather than adjusted downward. This has put some pressure on near term gains for U.S. stocks. We believe this is due to the fact that inflation continues to weigh on investors’ minds and the ability of the Fed Reserve to keep inflation concerns at bay. In terms of next week, we may or may not see a rate cut. The Fed has made it clear that they will continue to monitor conditions closely. Market participants are pricing in two more rate cuts this year, so that could also put pressure on stocks in the next few weeks. Regardless of the timing, the Fed Reserve has begun an easing cycle and that is bullish for US stocks. We expect to see bond yields come more in line with rate cuts and expect to continue to see strong gains in US stocks towards year end and into early next year.

Please reach out to us if you have any questions or if you’d like to discuss the market and positioning in greater detail.