Weekly Commentary
September 27, 2024
Markets this week continued their optimistic tone, with major US indices posting new highs for the year, following a positive week last week on the Fed rate cut news.? As the month and the quarter for that matter come to an end on Monday, it appears that stocks will close out in positive territory, something that seemed remote following a tumultuous beginning to the month.? As of the writing of this newsletter, both the S&P and the Nasdaq are higher by around 2% for the month.? Just as pertinent is the fact that non-tech sectors have taken the front seat in the recent market rally, as the likes of Nvidia and other AI-related companies have actually not been the major driver of performance of late.? This could be related to valuation differentials, but also to the economic and monetary backdrop, as old-economy names are better positioned in an economic slowdown.? This week also saw the release?of the PCE inflation number, coming in at 2.2% YoY in the month of August, while the core PCE printed a 2.7% number, more or less in line with expectations.? In other words, given the lack of inflation surprises, the Fed will likely be inclined to follow through with additional rate cuts for its upcoming meetings.? This has also had an effect on the commodity and currency market, with the much-watched EUR rate rising to the $1.11 level, while crude oil continues to weaken on soft demand globally in spite of a weaker USD.? Gold has remained buoyant at the 2640 per ounce level.
Bonds have remained range-bound and the benchmark 10-year rate, and a bull-flattening scenario is under way, with the short end moving more than the long end.? We remain cautious on longer duration and believe that the short end will continue to fall with the longer end anchoring in the current range.??
Finally, as the fourth quarter begins, earnings season is right upon us.? Look for volatility to reappear again with earnings announcements, as well as any "October surprise" that could bubble up from the election.??