Quarterly Market Review - Q3 2024

Welcome to the RPAG Quarterly Market Review for Q3 2024, where we discuss U.S. equity markets, international equities, the broad U.S. fixed income market, fed rate cuts, and much more.

• Jeff Elvander, CFA, Chief Investment Officer

Summary

Both equity and fixed income markets experienced strong third quarter performance. U.S. Equity rose 6.2% (Russell 3000), with utilities stocks leading the way and are now the best performing sector YTD. Large cap value outperformed large cap growth in the quarter by over 600 basis points (9.4% vs. 3.2%), although YTD, large cap growth has outperformed large cap value by almost 800 basis points (24.5% vs. 16.7%). International equities and Emerging Markets equities performed very well over the quarter, posting gains of 7.3% (MSCI EAFE) and 8.7% (MSCI Emerging Markets), respectively. The broad U.S. fixed income market returned 5.2% (Bloomberg Barclays Aggregate) over the quarter. This coincided with the Fed cutting rates by 50 basis points as they determined inflation was at a suitable level to start bringing down the Fed Funds Rate. The unemployment rate remained flat from last quarter at 4.1%.

Quarterly and year-to-date returns of the following indices: U.S. Equity (Russell 3000 Index), Fixed Income (Bloomberg Barclays U.S. Aggregate Bond Index) and International Equity (MSCI ACWI ex U.S. Index).

U.S. Equity

• The broad U.S. equity market, as measured by the Russell 3000 Index, was up 6.2% for the quarter.
• The best performing U.S. equity index for the quarter was Russell 2000 Value, returning a positive 10.2%.
• The worst performing U.S. equity index for the quarter was Russell 1000 Growth, returning a positive 3.2%.

Over the last year, growth stocks outperformed value stocks by 14.40%.  For the trailing quarter, value stocks outperformed growth stocks by 6.20%.

The graph above is plotted using a rolling one-year time period. Growth stock performance is represented by the Russell 1000 Growth Index. Value stock performance is represented by the Russell 1000 Value Index.

International Equity

• Developed international equity returned a positive 7.3% in the last quarter (MSCI EAFE).
• Emerging market equity posted a positive 8.7% return (MSCI Emerging Markets Index).

Fixed Income

• The broad U.S. fixed income market returned a positive 5.2% (Bloomberg Barclays U.S. Aggregate) for the quarter.
• The best performing sector for the quarter was Corporate Investment Grade, returning a positive 5.8%.
• The worst performing sector for the quarter was Cash, returning a positive 1.4%.

Historical Market Returns Following Rate Cuts

The Federal Reserve decreased the Fed Funds Rate by 50 basis points at the September FOMC meeting to begin a potential series of rate cuts in response to falling inflation. The charts below show the market returns following the first rate cut in previous rate cutting regimes. There has been a wide dispersion in equity market returns as some rate cuts have been into a recession while others have led into new bull markets. The U.S. 10-year treasury had a positive return two years after the first cut in each of these scenarios.

Source: FactSet, Federal Reserve, LSEG Datastream, S&P Global, J.P. Morgan Asset Management. Past performance is not a reliable indicator of current and future results. Excludes 1998 episode due to the short length of the cutting cycle and economic context for the cuts. Guide to the Markets – U.S. Data are as of September 30, 2024.

Download a copy of this market review document by clicking here, or contact us at the email address below.

________________________________________