October 9, 2024

This third quarter of 2024 brought several memorable events. Unemployment rates have crept slowly upwards and recent polls suggest that trend is expected to continue.¹ Even so, according to a recent report by the Bureau of Economic Analysis, real GDP has risen by 4.6% for January through June.² Hurricane Helene made landfall in central Florida as a category 4 hurricane, and devastated regions across the southeast. Airlines are still recovering from an update to widely adopted software that interrupted their systems in mid-July. The Republican and Democratic National Conventions were held in late July and mid-August, respectively. Election tensions continued to rise as the first debate held for former President and Republican nominee, Donald Trump, and Vice President and Democratic nominee, Kamala Harris, took place in early September. Markets experienced two  heavy selloffs in the quarter, one in early August and the other, early September. 

The most immediately impactful, and anticipated, event of the third quarter came on September 18, when the Federal Open Market Committee (FOMC) released their decision to cut interest rates for the first time since March 2020. Based on comments from Fed Chair, Jerome Powell, the long-awaited rate cut was made in the spirit of resilience rather than any material economic slowdown. However, it is rather soon to determine if rates have in fact been cut soon enough, or if this decision was made all too late. Futures markets are still pricing in at least two additional cuts by year end which may cause market reaction to these, if they do materialize, to be more muted.

A closer look at the market performance for  September alone has shown that many indexes began the month trending downward. However, this sell-off appeared to have reversed by the second week of the month allowing for a few major indexes to close the month at record highs. Following the Fed’s announcement of its rate  cut, the market has followed a steady upward trend, but it is difficult to attribute this appreciation to the Fed’s decision.

Withholding the first week, where the market sold off heavily, September saw a nearly uninterrupted upward trend. The recovery from that first week influenced the returns for the month, but many major indexes still closed green , a few hitting record numbers. NASDAQ returned 2.76% as tracked by the NASDAQ Composite Index and the S&P 500 2.14%. Gold and silver commodities ended up 3.27% as tracked by the Philadelphia Stock Exchange Gold and Silver Index, fixed income up 1.34% as tracked by Bloomberg’s Aggregate Bond Index. International markets also performed well with the MSCI All Country World Index and MSCI Emerging Markets Index both ending up 1.87% and 6.68% respectively. Despite adverse events and the two major sell offs, the above indexes closed green as of quarter end as well.

The positive returns from all indices are signs of appreciation in the economy, but market participants are eager to know if this performance will continue through the election season. Markets can exhibit increased volatility during presidential elections.⁴ This volatility is often attributed to increased tensions or heightened uncertainty.⁴ During times of uncertainty, human emotion has the potential to do more harm than good. And if human emotion controls investments, the outcome can negatively impact long term savings. Fortunately, professional money managers, like Stadion, are led not by emotion but by knowledge and experience in times such as these.

If the fourth quarter desires to be anything like the third, then it has its work cut out. As of now economists are expecting unemployment rates and GDP to continue to rise a tight presidential election to take place, and further rate cuts that could bring the overnight rate as low as 4.4%.³ However, these expectations may not have considered  the Longshoreman's strike that took  place along the East coast right as September was ending. This was the first strike of this nature in nearly 50 years, and because imports/exports have a high influence on daily life, this strike had  the potential to bring catastrophic interruptions to business operations. That it was quickly suspended by the third day of October is, perhaps, a disquieting comfort.⁵ While this resolution was certainly a relief for businesses of all sizes going into 4Q, the fact remains that the market has been whipsawed by both expectations and surprises and its peaks and valleys appear to be getting more dramatic the more they occur.  

Only time will tell if economists' expectations materialize. 

Hazel Allen
Ops Analyst

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