Unsettling Employment Figures Before Fed Meeting: Will Market Turbulence Ensue?

Third Quarter 2024 Review

Volatility surged in the third quarter, creating turbulence in the market as we shifted from July to August and then to September. This rollercoaster ride of ups and downs was fueled by uncertainties about the economic future and the mixed signals presented by financial data.

Strange Data, The Fed, and Rising Rates

• In August, weak jobs reports in July and August raised concerns about a slowing economy.
• However, the September jobs report surprised everyone with better-than-expected numbers.
• The Fed responded by cutting overnight rates by 50 basis points in mid-September to prevent an economic slowdown.
• Despite the rate cut, the 10-year Treasury rate increased by about 60 basis points as investors sought higher premiums for long-duration positions.
• The economic data has been inconsistent, with significant revisions, making it challenging to predict the fixed-income market’s future.
• If the economy continues to outperform expectations, we may see further rate hikes, a stronger dollar, and tighter financial conditions.

  Earnings Outlook

• Earnings estimates for the equity market are being revised downward for 2024 and 2025.
• Margin estimates historically start high and decline over time, with 2025 estimates starting at an elevated 13.8%.
• It is unlikely that margins will rise by 100 basis points to meet this estimate.
• Lower EPS valuations could impact the S&P 500’s PE ratio and growth rate, signaling that stocks may be more expensive than they appear.
• This discrepancy between growth rates and PE ratios is concerning, with PE ratios at the upper end of historical ranges since 1990.

  Portfolio Update

• Despite the market’s overpricing, the portfolio has underperformed the S&P 500 Total Return Index in 2024.
• The Mott Capital Thematic Growth Portfolio has risen by 9.58% through 9/30/24, while the S&P 500 Total Return Index gained 22.1%.
• Position updates remain relatively unchanged, reflecting caution in a volatile market.

  3Q’24 Stock Performance

• Illumina, Shopify, and Intuitive Surgical showed gains, while Alphabet and Microsoft faced losses.
• Some technology companies struggled post-mid-July due to increased scrutiny on AI project spending.
• Boeing was the worst performer but shows potential for improvement with a new CEO and a solid order backlog.
• Cash positions remain stable, providing liquidity to capitalize on market pullbacks.

  In conclusion, the third quarter of 2024 was marked by volatility, mixed economic data, and downward earnings revisions. Investors should proceed with caution in the current market environment, with a focus on balancing risk and potential rewards to navigate the uncertainties ahead. Title: The Ultimate Guide to Investing: How to Make Your Money Work for You

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     Types of Investments

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  5. Stocks: Buying shares of a company entitles you to a portion of its profits and potential growth.
  6. Bonds: Bonds are debt securities issued by governments or corporations. They offer fixed interest payments over a specified period.
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  8. Real Estate: Investing in real estate can provide rental income and potential appreciation in property value.
  9. ETFs: Exchange-traded funds (ETFs) are similar to mutual funds but trade on stock exchanges like individual stocks.

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  Analysis:

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