Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today, I wanted to take a few minutes to give you an update on the markets for the month of October.
Market Overview
For October, the S&P 500’s total return was down about 1.0%, with most of the downside occurring on the last day of the month as investors digested earnings outlooks from Microsoft and Meta. Concerns about slowing growth in key tech sectors added pressure to the broader market. Despite October’s negative monthly return, the S&P 500’s performance remains strong year-to-date, with total returns around 20.81% for the year.
So far with about 70% of S&P 500 companies reporting earnings for the third quarter, revenue growth has averaged 5.3% year-over-year, while earnings growth has been solid at 8.75%.
Q3 GDP
Growth The third-quarter GDP grew at an annualized rate of 2.8%, slightly below estimates of 2.9% and lower than last quarter’s 3.0% growth rate. This quarter’s growth was primarily driven by consumer spending, which contributed 2.46% for the quarter.
Inflation and PCE Update
The latest PCE data showed year-over-year inflation moving closer to the Fed’s 2% target, with the headline PCE inflation rate at 2.1%. This progress has alleviated concerns about persistent inflationary pressures, and signals that the Federal Reserve may have more room to reduce the Federal Funds rate further as they shift focus toward supporting the labor market, which has recently shown signs of cooling.
Jobs Market
The October jobs report indicated a substantial slowdown, with only 12,000 jobs added to the economy—well below expectations of 100,000. Contributing factors included recent hurricanes and ongoing strikes, impacting hiring levels. Despite the limited growth, the unemployment rate remained steady at 4.1%, indicating a stable, albeit cooling, labor market. This data will be closely watched by the Federal Reserve as it assesses potential adjustments to interest rates.
Federal Reserve & Bond Market
The Federal Reserve is set to conclude its next meeting the day after the election, with market expectations pointing to a 0.25% rate cut. Additionally, another 0.25% cut is projected for the December meeting, which would bring the total rate cuts for 2024 to 1%, lowering the Federal Funds rate to approximately 4.25%. Looking forward, the market anticipates a final Federal Funds rate at around 3.5% by the end of 2025, reflecting expectations for a more supportive interest rate environment as inflation stabilizes.
Despite these recent rate cuts, the 10-year Treasury has risen, ending October near a three-month high at 4.28%. This increase reflects broader market factors, including concerns over the US fiscal deficit and government spending.
Outlook
Looking ahead, investors will remain attentive to labor market data, Federal Reserve policy shifts, corporate earnings outlooks, and the upcoming election next week. As inflationary pressures continue to ease, the Fed may have flexibilities to support economic growth through rate adjustments. Thanks again for joining me for this month’s market update.
