Market Commentary
Can the Market Gains Broaden out to Areas Other than the Tech Darlings?
Overview- The rally in the equity market has built momentum during the third quarter. When we penned our second quarter outlook, the market had barely broken out above the highs of 2024, but the market has now extended about 10% above last year’s high. While the labor market is showing signs of weakening (this may be mostly due to reduced immigration), the US economy continues to muddle along in a “K” economy where the top wage earners are doing much better than the rest of the population. The most substantial change since our last outlook is Fed Policy. Having cut rates once in September, and again this week, with another cut possible later this year, the Fed is clearly in an easing mode. This is typically bullish unless the economy is in the middle of a recession – which is not the case at the moment. J.P. Morgan research highlighted that there have only been four instances in which rates were lowered with the S&P 500 at an all-time high. One year out, the benchmark was higher each time with an average return of 20%; the worst return was 15%. Of course, there are no guarantees, but with the monetary winds to its back, the markets can continue to move higher unless an economic shock occurs from a policy change (we have already seen this once this year, so it is not out of the question). The seasonal tendency is for stocks to do well in November and December, [...]