weekly market update 9/20/2024

“We now see the risks to achieving our employment and inflation goals as roughly in balance, and we are attentive to the risks to both sides of our dual mandate.”
~ Jerome Powell during his September 18th Press Conference ~

The Federal Reserve cut short-term interest rates by 50 basis points (0.50%) on Wednesday as Fed Chair Jerome Powell highlighted a slowing labor market and the need to “recalibrate” policy to support a soft economic landing.  Since falling over -4% during the first week of September, the S&P 500 has now rallied roughly +5.4% to end the week near all-time highs.  However, per data from Goldman Sachs, since 1928 the second half of September is the worst two-week period of the year, so we would not be surprised by an increase in market volatility as investors digest Wednesday's Fed decision and next week’s economic data, notably inflation indications from August’s PCE and the final reading for Q2 GDP.

INTEREST RATE CUTS AND STOCKS

In the short to medium-term, we expect continued choppy trading, particularly heading into the November elections, but historically the start of interest rate cut cycles from the Federal Reserve is positive for stocks.  For example, per research from JPMorgan, each of the last five easing cycles saw the S&P 500 higher on a 1, 3, 6, and 12-month basis.  Goldman Sachs noted that during the five cutting cycles since 1984, where the economy did not quickly enter recession (the JPM data includes the 2007-2008 Financial Crisis for example), the S&P 500 typically returned +6% during the three months, +9% during the six months, and +17% during the 12 months following the first Fed interest rate cut.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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