On Air with Altair: 3Q 2024 Market Review Video
Want to hear Altair’s analysis of the markets, but lack the time to read all of Altair Insight? Watch our video summary of the report and get caught up on our market review in 3 minutes.
FED RATE CUTS ARE WELL-TIMED
Perhaps the biggest change this year has been the Federal Reserve’s half-percentage-point reduction in interest rates – with more cuts likely on the way. We believe they are coming at a good time. In the last 50 years, S&P 500 returns have been well above average in rate-cut cycles that began in a healthy economic environment – as we believe this to be. The Fed’s inflation crackdown has helped reduce price growth to near the 2% target. Inflation remains vulnerable to supply-chain problems or the possibility of an oil price shock from further escalation of the Middle East war. But the rate cuts are timely and should ultimately benefit the economy.
ECONOMIC GROWTH HAS NOT FALTERED
The U.S. economy has made steady progress toward a soft landing and continues to drive the world economy forward. The strength of the service economy has more than offset manufacturing weakness. The Atlanta Federal Reserve Bank estimates that the economy expanded at a robust 3.4% annual rate in the third quarter. Corporate earnings are estimated to have grown for a fifth consecutive quarter, up about 4% from a year ago. Lower rates, recovering real wages and heavy government spending should provide tailwinds into 2025. We still see no sign of the recession that many predicted as a result of high rates.
MARKETS
The bull market galloped past the two-year mark on October 12th, raising the legitimate question: How much longer can it last? Even after a nearly 35% runup in 12 months entering the current quarter, we believe this one is capable of running quite a bit further. Historical statistics do not dictate long-term market performance; economic and financial conditions do. But it is worth noting that if this bull market were to end now after 24 months, it would be one of the shortest on record. What gives us confidence besides the power of rate cuts is the more recent broad-based nature of this rally, underpinned by solid economic fundamentals in the U.S. and across much of the globe.
OUR OUTLOOK AND THE ELECTION
Many of you may have concerns about the elections and their impact on markets. Keep in mind that the stock market generally has delivered solid returns regardless of the configuration of power that emerges in Washington. What mostly drives the market are the economy, Fed policy, corporate earnings and consumer spending. We think all of those important areas are in good shape.
All investments may lose money. We do not intend for this material to match your goals or risk tolerance and our opinions may change. For more information about our business practices and identified conflicts, visit https://altairadvisers.com/disclosures/.