• Despite a Federal Reserve rate cut in September, rising inflation concerns and a cooling labor market overshadowed optimism, leading to a cautious market environment in October.

• While October brought challenges, year-to-date returns remain strong, highlighting underlying market resilience despite the month’s turbulence.

• The path to normalized inflation may not be linear, strengthening the case for resilient portfolios in preparation for the road ahead.

Join Ben Hockema to review the investment markets through September 30th, 2024.

• Markets were generally positive in August, despite a tough start to the month as investors wrestled with weakening economic data, geopolitical unrest and global growth.

• Shifting language at the Federal Reserve’s Jackson Hole summit indicated a renewed focus on the employment situation more so than inflation.

• Markets have priced in a first rate cut in September, shifting the question of “when?”  to “how much?”

Ben Hockema reviews the 2nd quarter investment market returns and discusses what might lie ahead for investors.

Key Observations

A fixation on the direction of interest rates continues to drive prices in the short term, including in May. Rates moved lower, pushing rate-sensitive asset classes ahead of their peers.

However, we take this opportunity to step back from the short-term focus on rates and discuss the findings of our latest long-term study on the efficient allocation of active and passive investing.

Notably, 92% of 10-year top-quartile managers spent at least one 3-year period in the bottom half of their peer group, highlighting that success is not linear. We have also added nuance to our review of efficient allocation in markets most likely and profitable to engage in active investing.

• Escalating conflicts in the Middle East have led investors to question what impact expanded conflict may have on their portfolios. Increasing oil prices has modestly priced in risk of expanded conflict into neighboring petrostates Iran and Israel.