Market Monitor: October Mid-Month Update
Headlines and Highlights
- Bull run in stocks enters third year: The U.S. bull market in stocks passed the two-year mark on October 12, dominated by big gains in the Magnificent 7 tech stocks but led more recently by stocks in multiple other sectors. The average S&P 500 bull market – defined as a rise in stock prices of 20% or more – has lasted 57 months and returned 167%, based on 15 bull markets since 1928. The current one has returned 67% through 24-plus months. Other asset classes have lagged but delivered solid gains. Small caps, international stocks and REITs all have risen by double digits in 2024, trailing the S&P 500’s 23.2% through mid-month.
- Inflation stays on bumpy path toward 2% target: Inflation’s downward progress was mixed in September, with the consumer price index (CPI) edging down to 2.4% year over year and core CPI ticking up to 3.3%. But there was no sign of prices heating up significantly, which should keep the Federal Reserve on track to lower interest rates again next month. Two more quarter-point cuts by year-end as the Fed projects would reduce the benchmark borrowing rate to a range of 4.25%-4.5%, which should provide an extra boost to the economy next year.
- Job market’s strength exceeds expectations: The labor market continued to defy concerns of a significant weakening that could threaten the economy. The latest reports showed businesses adding 254,000 jobs in September, the most in six months, and no hint of significant layoffs based on modest totals for both initial and continuing claims for unemployment insurance. The unemployment rate declined to 4.1% from 4.2% – well above last year’s 3.4% bottom but still low by historical standards.
Chart of Interest
Ebullient: The U.S. stock index has outpaced all other major asset classes in the past two years.
Sources: Morningstar, Altair Advisers
Key Takeaways
- Retail sales increased more than expected in September, the latest evidence of the unflagging consumer demand that is powering economic growth. The Commerce Department reported a 0.4% rise in retail purchases, unadjusted for inflation. Consumer spending is being underpinned by the healthy employment market, wage growth and solid household balance sheets.
- Corporate earnings season for third-quarter results is off to a strong start, showing continued momentum for the economy. Profits for S&P 500 companies are projected by analysts to have risen 4.1% over the same period a year ago, according to FactSet, for a fifth straight quarter of growth that further reduces recession concerns.
- Chinese stocks fell 10% in a week, dropping the emerging-markets index 2% lower in the first half of October. The sell-off reflected investors’ disappointment over the slow pace of Beijing’s stimulus rollout, which sent the market surging last month.
- Oil prices, which had risen above $86 a barrel earlier this year, fell back to $70 this month after Israel said it would limit its expected strike on Iran to military targets. An intensification of the Middle East war remains the biggest threat to a resurgence of oil prices and inflation.
- US. stocks in four sectors – utilities (+30.2%), communications services (+26.4%), health care (+26.1%) and industrials (+19.5%) – have now surpassed technology (+19.5%) in year-to-date gains as the market rally broadens. Every sector but energy (+9.7%) has gained by double digits in 2024.
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