October 2024 Investment Strategy

The S&P 500 suffered two very modest corrections in the third quarter before continuing its mechanical climb to new all-time highs. The tech-heavy Nasdaq 100 has failed to retake its highs, potentially indicating failing leadership. The big news was the Federal Reserve cut short-term interest rates by 0.50% to 4.75%. This was the first rate cut since the Fed rapidly increased interest rates in 2022 to tame a surge of inflation. While the reduction happened in late September, the market began pricing in a series of aggressive rate cuts starting in May. Over the past 6 months, the 10-year treasury fell from roughly 4.7% to 4.0% today, benefiting mortgage rates and other long-term borrowing. This has relieved pressure on many overindebted companies, real estate deals, and numerous other types of financial investments. The Fed made this decision to encourage credit to enter several stressed areas of the economy and prevent unnecessary economic damage being caused by the high interest rates. As we have discussed previously, mortgage demand has been anemic and big city commercial property market is in disarray. More quietly, there has also been severe stress in private equity linked companies which now employ a sizable segment of the U.S. workforce.