Market Commentary: Bird’s Eye View for Q4 2024

The third quarter of 2024 brought unexpected—and broad—strength in stocks. Bonds also performed well, spurred by a drop in interest rates late in the quarter. Frank J. Esposito, CFA, Managing Partner at EverNest, starts his latest 8-minute video market update by reviewing market performance.

He then shifts to looking ahead, including at the topic clients are inquiring about most—the upcoming U.S. presidential election.

Watch the video for insights on:

• Market performance: All areas of the market showed positive performance, with Large Cap Value and Small Cap outperforming Large Cap Growth. International Developed Markets and Emerging Markets also performed well. The quarter was volatile, in part due to a change in Japanese interest rates.
• Market leadership change: The equal-weighted S&P 500 Index outperformed the cap-weighted version—as it often has, historically. Small caps also performed well. We anticipate these trends to persist, though concentration risk remains high, with the largest 10 stocks in the S&P 500 Index representing 36% of the Index.
• Interest rates and inflation: The Federal Reserve cut rates by half a percent at the end of the quarter, with the market expecting further cuts to the 2-3% range over the next 12-18 months
• Economic indicators: While the unemployment rate remains relatively low, historical patterns suggest that slight increases in unemployment often lead to larger increases. The Fed is shifting its focus from inflation to the labor market.
• Capital expenditures: Investors are eyeing the so-called Magnificent Seven stocks, among others, with a more critical eye to capital expenditures—especially in AI. Capex is necessary for growth but introduces the risk that companies will fail to achieve a favorable return on investment.
• Gold: We added gold for diversification. Gold tends to perform relatively better than equities when equities struggle. Central bank demand for gold has been high.
• U.S. election: Both the so-called “misery index” and the strength of the S&P 500 Index suggest the incumbent party is more likely to win the presidency. However, either candidate faces difficult choices due to high borrowing expenses and debt-to-GDP ratio—and, historically, presidential election results tend to impact certain industry groups but not much the overall market (which grows over time based on population growth, longevity and productivity).

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This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this report.

An index is an unmanaged portfolio of specific securities, the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown.

The information herein was obtained from various sources. EverNest does not guarantee the accuracy or completeness of information provided by third parties. The information in this report is given as of the date indicated and believed to be reliable. EverNest assumes no obligation to update this information, or to advise on further developments relating to it.

S&P 500 Index – a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.

Russell 3000 – The index measures the performance of the largest 3000 US companies representing approximately 98% of the investable US equity market. It is market-capitalization weighted.

S&P Small-Cap 600 – measures the performance of the small-cap segment of the U.S. equity market. It includes market capitalizations of between $450 million and $2.1 billion.

MSCI Emerging Markets Index – a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of emerging markets. The MSCI Emerging Markets Index consists of 23 emerging markets country indexes.

MSCI Europe Index – captures large and mid-cap