Quarterly Statement Letter Q3 2024

Forty-three stock market all-time highs through Q3 2024 and counting. 

The U.S. stock market has risen by 22% through the first three quarters, with gains concentrated in the technology sector, driven partly by advancements in artificial intelligence. Beyond the S&P 500, international stocks are up +14%, real estate is up +14%, and gold prices are up +28%. These returns make for an impressive year-to-date performance.

The U.S. bond market has also performed well, returning +4.5% through Q3. The Federal Reserve’s (Fed) September rate cut, the first since March 2020, lowered interest rates, helping to boost bond prices. 

For more market discussion on this topic play our podcast episode:
vectorwealth.com/posts/market-update-october-2024

The labor market remains robust, with the BLS’s unemployment rate at around 3.8%. However, wage growth has slowed, and consumer spending has softened. Fed Chairman Jerome Powel acknowledges that further rate cuts may be necessary if economic momentum slows. Markets appear to be preparing for an additional 0.25 to 0.50% worth of rate cuts by the end of 2024 or early 2025.

Historically, stock markets have tended to perform well after cuts to interest rates. Lower rates make borrowing cheaper for businesses, often leading to greater investment and economic growth. Lower rates also pressure investors who must choose between buying a now lower-yielding bond against a potentially higher return in the stock market.

The 2024 presidential race and broader election cycle bring a heightened focus to policy differences. Markets generally don’t like uncertainty, and we may experience market volatility in the short term. From our perspective, staying focused and aligning with long-term goals is better than making drastic investment decisions based on political outcomes.

Is it unwise to invest in markets at an all-time high? While it might seem intuitive to avoid buying the local top, it hasn’t made much difference historically. We compared investing at any other time to buying at a new high, and the reality is that markets tend to rise over time. 

Timing and successfully trading the market is almost impossible. However, with time in the market, investors benefit from the market’s historically long-term growth profile: recovery and climb. Recall that before the S&P 500 ticked its 43rd all-time high of the year, the 41st, followed by the 42nd occasion, held the all-time-high title.

Historically, the compounded returns generated from time-in-the-market have outweighed short-term ups and downs. By aligning your investments with your goals, we believe investors are well-positioned to benefit from the market’s growth over time.

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