October 2024 Market Insights
BY: RYAN P. JOHNSON, CFA, CFP® - MANAGING DIRECTOR OF INVESTMENTS
Stock prices continued to get a lift from the positives of slowing inflation, a supportive Fed, and continued corporate earnings growth. Interest rates, such as the 5-year Treasury yield, hit a one-year low ahead of the Fed cut, but have since rebounded towards the middle of a two-year range. As the Fed continues to cut rates, returns on cash in money market funds will fall as well.
Stocks:
In recent days, the S&P 500 crossed above 5,800 for the first time, the Dow Jones Industrial Average reached 43,000 for the first time, and the Nasdaq came within 1% of its July high. Stock returns have been strong over the past 3, 6, and 12 months. We expect more modest returns over the next several quarters because we do not expect a repeat of increasing valuations that helped fuel the current rally. If valuations fall, that will be a headwind. Earnings growth, as well as a small dividend yield, may be more important in driving total return higher from here in the long run. Analysts are currently projecting earnings growth of over 14% in the fourth quarter of 2024 and over 14% earnings growth for the full year 2025.
Bonds & the Fed:
Since the Fed cut rates for the first time in over four years, expectations for future cuts have changed in the past month because job reports were better than expected and inflation readings were higher than expected. The bond market got a little ahead of itself a month ago, and some interest rates, like mortgages, have increased since the Fed cut. The market expects the next Fed meetings on November 7th and December 18th to result in 0.25% cuts, which would put the Fed Funds rate at 4.33% by year-end. Year-to-date and one-year returns on bonds have been above average, due to higher bond prices that go hand-in-hand with lower rates. We reiterate that more modest returns are likely in the year ahead.
Economy:
In early October, the monthly jobs report showed an improved unemployment rate of 4.1%. Though manufacturing continues to be sluggish, the much larger services portion of the U.S. economy continues to grow. Consumer prices rarely decline in aggregate, but the rate of price increases continues to improve. A recent consumer inflation reading showed prices were 2.4% higher than a year ago, including lower auto prices but higher insurance costs.
Also Interesting:
Social Security benefits will increase 2.5% in 2025. Over 70% of Americans’ net worth is held by those age 55 and older. More than three-quarters of Americans live in homes without landlines. Lastly, it is estimated that cash and check payments make up less than 10% of payment volumes in the U.S.
Buckingham is here for you:
Buckingham Advisors continues to welcome new households and small businesses to our Family of Clients! Our focus remains on serving each family, each business, and each foundation with special attention to what matters most to them. Feel free to forward this issue of Market Insights on to others. To get in touch directly, please use the following link: https://mybuckingham.com/contact.