Q3 Market Update 2024

So far, the stock market indices have performed well in the third quarter, mainly led by a few mega-cap tech and AI-related companies. In the past few weeks, we have seen a bit of rotation from those big winners early in the year to many companies that had lagged most of the year. Large-cap indices represented by the S&P 500 and the Nasdaq 100 indexes are down -2.06% and -5.99%, respectively, through August 9th. The Dow Jones Industrial Average, representing thirty large and more value-oriented stocks, has gained 1.03% during the same period, and the small-cap Russell 2000 index is up 1.75% after small companies have languished for over two years.

With economic data coming in weaker, showing cooling inflation and a slowing overall economy, bonds have rallied, and interest rates have fallen. This has been welcomed news for home buyers. For investors in a balanced portfolio, the gain in bonds has helped the overall performance of those investors in the typical 60/40 portfolio (60% stocks and 40% bonds).

While we came into the quarter with relatively high valuations and optimism for many companies, it should be no surprise to see markets correct here, as is typical for any bull market.

In a typical election year, markets historically consolidate from mid-August until late October. The current volatility and decline have been accelerated due to some global market instability; however, it is better to track an open-field election. A few weeks ago, the election was between two “known entities.” While Kamala Harris is the current vice president, some dynamics may differ from those of a typical incumbent candidate. 

August is often a volatile month, and this year has been no exception. After early August selloffs, there tends to be some bouncing around as the market regains its footing. It is important to put this into context: earnings have been decent, stock trends remain up over the intermediate term, and the service sector, which accounts for a large part of the U.S. economy, continues to do well.

 

The information presented in this post is the opinion of West Michigan Advisors and does not reflect the view of any other person or entity.  The information provided is believed to be from reliable sources but no liability is accepted for any inaccuracies.  This is for information purposes and should not be construed as an investment recommendation.  Past performance is no guarantee of future performance.  West Michigan Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission.

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