Market Review

As of September 30, 2024

US stocks reach record highs despite a spike in volatility not seen since the COVID pandemic during the quarter. A big rate cut from the Federal Reserve, falling inflation, and optimism around the strength of the US economy also drove a notable rotation in winners during the quarter. The AI-driven stock market fever broke, and market leadership shifted towards favoring small caps undervalued stocks like dividend payers and real estate. Across the pond, emerging market stocks rose to their highest levels in two and half years. The rally was led by China following stimulus from its central bank to help its ailing property market.

All sectors in the S&P 500, with the exception of Energy, posted gains. Interest rate-sensitive sectors such as Utilities and Real Estate led the pack with gains of 19% and 17%, respectively.

Across size, we saw a rotation into small-cap stocks for the quarter based on optimism that the economy was strong enough to avoid a recession. Within style, value stocks beat growth as investors questioned whether the heavy spending on AI for technology stocks would actually pay off.

Interest rates fell considerably, leading to strong returns for bonds across the spectrum marking a sharp uptick for year-to-date bond returns. The yield on the benchmark 10-year US Treasury note, which falls when prices rise, dropped to 3.8% from 4.3% at the end of June, reversing a two-quarter streak of rising yields.

Finally, across other asset classes, gold gains and oil falls. Weakening demand sent oil lower despite ongoing geopolitical risks. Gold, traditionally perceived as a safe haven, has climbed roughly 27% this year, outperforming the S&P 500 with gains of 22%. The gains have come as demand for gold remains high from central banks, including China, Turkey, and India, looking to diversify away from the US dollar in addition to other investors concerned about the size of the US deficit and the stability of the US dollar over the longer term.