facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
September Market Commentary: The Finish Line or the Starting Gate? Thumbnail

September Market Commentary: The Finish Line or the Starting Gate?

Markets & Economy

August Recap and September Outlook

As we transition from summer to fall, the spotlight is on the anticipated shift in the Federal Reserve’s monetary policy, moving from steady rates to potential rate cuts.

Recent non-farm payroll data from July and August suggest a cooling labor market, yet other economic indicators remain robust. While some predict a 50-basis point rate cut from the Fed, their cautious and data-driven approach, coupled with the lack of significant economic distress, points towards a more conservative 25-basis point cut.

Despite some market volatility, a risk-on sentiment has returned.

Let’s dig into the data:

  • Non-farm payrolls: August saw an increase of 141,000 jobs, falling short of expectations by 21,000.
  • Inflation: PCE inflation, the Fed’s preferred metric, held steady at 2.5% year-over-year in July. CPI rose 2.9%, marking the lowest annual growth rate since March 2021.
  • Consumer confidence: The Conference Board’s index climbed to 103.3 in August.
  • GDP: The second quarter saw a 3.0% growth rate, a significant jump from the 1.4% increase in the first quarter, per the Bureau of Economic Analysis.

How Does the Data Add Up?

With the Fed holding rates steady since July 2023, the upcoming FOMC meeting in September will focus on the extent of the initial rate cuts. More crucially, analysts will scrutinize Chairman Powell’s remarks to predict the pace of rate reductions through 2024 and 2025.

Interest rate cuts can take up to a year to fully impact the economy, making the pace of cuts critical. As of early September, Fed fund futures suggest an 88% probability that rates will drop by 100 basis points by December 2024.

Is the strong economy ready for such a significant cut? The 3% GDP growth in Q2 2024, driven by consumer spending and business investment, indicates a healthy economy. Notably, consumer spending on durable goods like cars and furniture suggests strong personal balance sheets.

However, a concern in the GDP report is the 1.3% income growth in Q2, mirroring Q1. Slower income growth could impact future consumer spending, despite the recent rise in consumer confidence.

Chart of the Month: The Fed’s Focus on Labor

Labor markets remain strong but are showing signs of slowing. If this trend continues, the Fed may accelerate rate cuts. 

Source: Department of Labor; Axios Visuals

Equity Markets in August

  • The S&P 500 rose 2.28% for the month.
  • The Dow Jones Industrial Average increased by 1.76%.
  • The S&P MidCap 400 dipped 0.21%.
  • The S&P SmallCap 600 fell 1.62%.

Source: S&P Global. All performance as of August 31, 2024.

Nine out of eleven GICS sectors saw gains, with Consumer Staples leading. Despite a volatile start, the market recovered, closing just below July’s high. The dominance of the Magnificent 7 diminished over the month.

Bond Markets in August

  • The 10-year U.S. Treasury yield ended the month at 3.91%, down from 4.04% in July.
  • The 30-year U.S. Treasury yield closed at 4.20%, down from 4.31%.
  • The Bloomberg U.S. Aggregate Bond Index returned 1.44%.
  • The Bloomberg Municipal Bond Index returned 0.79%.

The Smart Investor

We’re on the brink of a significant monetary policy shift. With rates set to decrease, new opportunities and choices will emerge for consumers and investors.

Rates are expected to remain higher than recent years for some time, so there’s still a chance to lock in higher rates on CDs. Credit card rates and other high-interest consumer debt will decrease slowly, so paying down debt now will save money. Consider how a new economic cycle might impact your portfolio. Are you taking the right amount of risk? Are your investments positioned to benefit from lower interest rates? If you’re planning to retire soon, will your income investments keep pace?

Combining personal goals, investments, and economic insights is at the core of what sound financial advice can provide. Feel free to reach out to if you’d like review how your portfolio is optimized for the upcoming changes and aligned with your goals.

This work is powered by Advisor I/O under the Terms of Service and may be a derivative of the original. The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.