September 2024 Market Summary

September 2024 Market Summary: Equities Gain Strength, Fed Cuts Rates, and Treasury Yields Decline

Stocks fell in the first week of September but gained strength leading up to and following the FOMC meeting on September 18th. The S&P 500 rose 2.1% in August, the Dow Jones Industrial Average advanced 2%, and the Nasdaq Composite added 2.8%. Emerging Markets was a big beneficiary of monetary policy easing, jumping 6.7% in September.

Eight of eleven sectors finished September in the black. Consumer Discretionary and Utilities led the way with respective gains of 7.3% and 6.6%, followed by Communication Services at 3.8%. Financials, Health Care, and Energy were the three sectors that went negative in September. Tumbling oil prices pushed the Energy sector 3% lower in September and into the last-place spot among all sectors.

Treasury yields fell across the curvewith shorter-term durations posting larger declines. The 1-month, 3-month, and 6-month T-Bills all fell around 50 basis points, reflecting the Fed’s half a percentage point rate cut. Declines were less steep further down the curve; the 10-year fell a tenth of a percentage point, and the 30-year dipped six basis points.

Bond funds benefitted from the Fed’s actions and declining yields. The iShares 20+ Year Treasury Bond ETF (TLT) and iShares iBoxx Investment Grade Corporate Bond ETF (LQD) both rose over 1.9%, and the Core US Aggregate Bond ETF (AGG) advanced 1.3%.

The Federal Reserve cut its benchmark Fed Funds Rate for the first time since March 2020

The Fed Funds Rate was lowered by 50 basis points from 5.50% to 5.00% at the September 18th FOMC meeting. As a result, the 15-year mortgage rate shed 35 basis points down to 5.16%, and the 30-year approached 6%. Inflation fell for the fifth consecutive month, though core inflation inched higher.

Employment

The unemployment rate dipped to 4.2% in August, ending a streak of four straight monthly increases. The decrease from 4.3% to 4.2% comes one month after the “Sahm Rule”, an economic rule of thumb serving as early warning of a possible recession, was triggered. The labor force participation rate remained unchanged at 62.7%. Nonfarm payroll data revealed 142,000 jobs were added in August, below the expected 161,000 but up from July’s revised figure of 89,000, which marked the lowest positive job gain for a month since May 2019.

Consumers and Inflation

The US inflation ticked lower for the fifth straight month, down to 2.53% in August; core inflation inched slightly higher to 3.20%, marking just the 2nd month out of the last 17 in which core inflation increased. Looking at the shorter-term month-over-month changes, the US Consumer Price Index rose 0.19%, and US Personal Spending increased by a quarter percent.

The Federal Reserve lowered its key Fed Funds Rate by 50 basis points at the September 18th FOMC meeting, bringing the key benchmark rate down from 5.50% to 5.00%. This was the first rate cut since March 2020, and comes after eight consecutive meetings in which the Fed maintained the Fed Funds Rate at 5.50%.

Production and Sales

The US ISM Manufacturing PMI was unchanged between August and September at a level of 47.20, and remains in contraction territory with a reading below 50. The Services PMI ticked up 0.1 points to 51.50 on the back of a 2.6-point rebound in July. The YoY US Producer Price Index fell to 1.73% in August, and US Retail and Food Services Sales were virtually unchanged in August.

Housing

US New Single-Family Home Sales contracted by 4.7% MoM, and Existing Home Sales dipped 2.5% MoM. The Median Sales Price of Existing Homes fell for a second consecutive month, by 1.1% MoM to $416,700 at the end of August. Mortgage rates fell further as expectations of a September rate cut became a reality at the September 18th FOMC meeting; the 15-year Mortgage Rate fell by 35 basis points to 5.16% while the 30-year shed 27 bps to 6.08%, both as of September 26th.

Commodities

The price of Gold surged 5.9% in September and set another new all-time high after breaking through $2,500 in August, ending the month at $2,661.90 per ounce. Crude oil prices dipped in September; the price of WTI reached a YTD low of $66.73 per barrel before settling at $71.33 on September 23rd, a decline of 4.3% for the month. Brent also set a YTD low in September before rebounding in the back half of the month to $74.95 as of September 23rd. Lower oil prices translated into lower gas prices, with the average price of gas falling by 11 cents in the month to $3.30 per gallon as of September 30th.

Cryptocurrencies

Rate cuts by the Fed and other national central banks helped drive cryptocurrencies higher in September, bucking an unfavorable seasonal trend. The price of Bitcoin surged to $65,663.69 in September, a rise of 11% in a month where the largest digital asset has declined by 5.9% on average over the last decade. Ethereum advanced 5.2% to $2,659.61, bringing its YTD return to 15.9%. Bitcoin is up 55.5% through the first three quarters of 2024.

 

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