2024 Q3 Market Commentary

The season is changing, and the leaves are turning from green to red before they tumble down.
Fortunately, the markets are behaving the opposite of nature’s forces – starting with a stock market
which has gone from red to green which avoided any semblance of a bear market drop.
Domestic equities have soared to record highs, while the total returns in bond markets have
increased from the Federal Reserve’s interest rate pivot. One more weather analogy: although
Fall has its gentle and calm days, there is much more uncertainty and volatility in the harshness
of winter. Investors should approach the months ahead with the same underlying expectations.
Now is the time for continued confidence and optimism about your long-term, diversified
investment strategy, but with cautiousness about the lagging consequences that changing
macroeconomic policy may have on market fundamentals.

Q3 Performance Highlights

– S&P 500: +5.5%
– NASDAQ: +2.7%
– Dow Jones: +8.2%

The S&P 500’s Q3 performance contributes to an impressive year-to-date return of nearly 21%
for 2024. This rally has been fueled by several factors:

1. Disinflation trends
2. Stronger-than-expected economic indicators
3. Robust labor market
4. Solid corporate earnings
5. Optimism surrounding artificial intelligence (AI) and its potential impact on productivity
and profits
However, concerns over rising interest rates and the Federal Reserve’s “higher-for-longer”
stance created some headwinds in Q3.

Looking Ahead: Cautious Optimism

As we move forward, it’s crucial to maintain a balanced perspective. While the current market
environment supports continued confidence in long-term, diversified investment strategies, we
must remain mindful of potential challenges:

1. Lagging effects of changing macroeconomic policies
2. Re-emergence of inflationary pressures
3. Return to the normal business cycle, including recessions
4. Geopolitical uncertainties
5. Upcoming U.S. election cycle

The Importance of Strategy Over Speculation

Recent market performance has once again highlighted the limitations of short-term market
predictions. A year ago, many analysts anticipated multiple Federal Reserve rate cuts in 2024
and projected lower market returns. Reality has proven quite different, with fewer rate cuts and
significantly higher stock market performance than forecasted.

This discrepancy underscores the value of focusing on personalized, long-term investment
strategies rather than attempting to predict short-term market movements. Examples of strategic
approaches include:

– Regularly rebalancing your investments back to your target allocation
– Utilizing Roth IRAs to minimize future tax implications
– Leveraging 529 education savings accounts for tax-efficient college funding
– Increasing your 401k/403b contributions after an annual raise
– Investing in tax-efficient and tax-free investments to generate passive income

Conclusion: Embracing a Strategic Approach

In conclusion, while staying informed about market trends and geo-political developments is
important, the key to successful long-term investing lies in adhering to a well-crafted,
personalized investment strategy. By focusing on your unique financial goals and working with
your knowledgeable advisor at CFA, you can navigate market fluctuations with confidence and
work towards a more secure financial future.