Q3 2024 Newsletter

The third quarter of 2024 brought positive news for investors as all major stock and bond market indexes rose. As always, the journey was far from smooth, with stock markets experiencing a drop during the last half of July before rallying in August. September stuttered briefly at the start of the month before rallying to close out the quarter.

The market appeared to “broaden” out over the last few months. US small and mid-sized company stocks finally bested their larger brethren. Similarly, non-US stocks outperformed relative to domestic peers. Fixed income investments also enjoyed an especially strong quarter, thanks in part to the US Federal Reserve delivering the first of its long-anticipated interest rate cuts. In response, bond prices rose, further boosted by the higher yields locked in over the past two years.

The Fed rate cut was widely expected and led to broader interest rates declining over the past few months. The effects can already be seen in both lending and savings rates. 30-year mortgages rates have dropped nearly 1.5% from their peak. Similarly, CD and money market yields have also begun to decline. Additional Fed meetings are scheduled for November and December, and many economists expect further rate cuts to occur at one or both of those meetings.

As the November election nears and brings with it heightened hope (or fear) about the future of the economy, it can be helpful to note that the US stock market has historically averaged positive returns under nearly every partisan combination. Since 1936, the 10-year annualized return of US Stocks for investments made at the start of an election year was 11.2% when a Democrat won and 10.5% when a Republican won. Similarly, broader economic growth and sentiment has also been nearly identical over time. The composite Purchasing Managers Index (PMI) tracks business trends across the manufacturing and services sectors, following data from employment, prices, inventories, and sales. Over the past 25 years, the average figures reported by this index are extremely similar under both Republican administrations (54.3) and Democrat ones (54.9).

While long-term economic fundamentals ultimately drive market performance, short-term volatility can be influenced by news of the day or the sense of anxiety and uncertainty that may precede major elections. Historically, there has been a rise in market volatility beginning two months before election day. However, by 30 days after the vote, volatility has typically subsided and is back in line with historical averages by 60 days after.

The occupant of the White House often receives the praise (or blame) for the state of the economy and markets. However, it is tax laws and government spending decisions made by Congress, coupled with monetary policy determined by the Fed, that have a much larger impact.

As always, please let us know of questions or concerns. Have a wonderful Fall!

The PWM Team

Thank you!

Bryan Pratt was awarded First Place in the Mankato Free Press “Best of Mankato” 2024 awards – Financial Planner category. Thank you to all who voted and for your continued trust and partnership!¹

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Congrats

We’re excited to announce that our team member, Adam Kunkel, recently obtained his Certified Financial Planner (CFP®) designation! The CFP® certification is recognized as the standard of excellence for the financial planning profession. Adam is the third on our team to obtain the CFP® marks, joining Bryan Pratt and Dustin Sauter.

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