Third Quarter 2024 ending Rant
As we round the corner to end Quarter number 3, we chalk up a positive quarter across pretty much all asset classes. Lots of geo-political and political arm waving but a reasonably steady economy with a “3 yards and a cloud of dust” market backdrop. Something for everyone….
Fixed income yields are coming down with the Fed’s rate cut. The 30-year mortgage has come down to the low 6’s which is great compared to last year. In perspective, it’s the level that was breached going lower way back in 2008. Still room to come down in historical terms and we expect it to do so. Probably not to the 3 percent level we saw, but closer to the 5 percent equilibrium point. For savers with treasury direct or similar accounts…. Those juicy 60 day 5 ½ percent yield are now sub-5. Still, plenty of places to park cash and make money but with rates projected to come down, the “salad days” are behind us.
Equity continued its march north with the regulars leading the charge. Growth (think Nasdaq) is the leader year to date BUT…. Q3 saw the out performance of small cap and old school Dow 30 stocks. Maybe a flattening out in the markets (which would be really cool) and the catch up of small caps could be in our future. Not a prediction but a wishful thought to keep the bulls running. Market rotation into value, small caps, and industrials would be the tonic for longevity.
As we have opined before, some of the economic mega trends are shaping the day and we expect that to continue. A short recap…. A/I is here to stay (for better or worse), medical technology and mainstream integration (think Fitbit and wearables), assimilation of a migrant workforce, and soon to be increase in taxes across the board. Like it or not, those factors are shaping us moving forward. They will be even more pronounced after the elections, regardless of which side wins.
Our forward view has not changed and is one of being “market neutral” on equities and intermediate duration on fixed income. As opined in previous rants, the easy money has been made and portfolios are looking just fine. Market have been in front of the rate decline story and have priced those moves in. Similar gains moving forward will be harder to come by (at least in the short term). A sideways market for a while is our expectation. Having done this for a lot of years my belief is that this is not the time to get over your skis and be too aggressive. Downside risk exist and valuations are getting a tad rich so make sure your portfolio reflects your true risk tolerance.
Last (and certainly not least) the politics of the day will no doubt get a bigger piece of our collective perception. As we have said before, in general, politics has a less than expected impact on the investment markets. Best possible case is normally a divided government with neither party holding all 3 chambers (President, Senate, House). That is the outcome we personally expect and gives us our planning baseline for 2025. Senate is leaning R, house is leaning D, and president could go either way. Still, lots of time and more to come, but that’s the planning scenario.
Thanks again for reading and thanks for the faith and trust you have given us now and over the years. It’s a relationship we take seriously and strive to uphold on a daily basis. Don’t hesitate to reach out for anything you may need or to just chat. We work for you.
Regards,
Ed, Frank, & Tammy
Edward Stiles
200 N Union St.
Kennett Square, PA 19348
cell 610-745-1931
stilesed@retire-me.com
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