Market Movements and Economic Insights: September 2024 Overview

September 2024 brought notable developments in financial markets, as equities experienced modest gains despite ongoing concerns about economic growth and potential risks. This blog post reviews the significant market events, economic data, and investor sentiment shaping the month.

Scope for caution

U.S. equity markets remained resilient in September. The S&P500 reached an all-time high of 5,733.5, rising 1.5% after the rate cut announcement, while the Nasdaq100 and Russell2000 posted gains of 2.5% and 2.3%, respectively. Investors welcomed the Fed’s 50 basis point cut, which signalled to ease monetary conditions despite mixed economic signals, such as subdued manufacturing activity and a softening labour market.

Economic Data Highlights Slowing Growth 

While equities made gains, underlying economic indicators hinted at slowing growth. The ISM manufacturing remained below 50 at 47.2, reflecting contraction, and the services index was stable at 51.5, pointing to a slowdown in GDP growth. US Federal Reserve’s Summary of Economic Projections suggests the Federal Reserve is confident in achieving a soft landing, with the Federal Funds rate projected to fall to 3.4% by the end of 2025.

Risks on the Horizon 

Despite September's market performance, challenges remain. U.S. equity valuations appear stretched, with elevated earnings expectations. The looming November elections also introduce political uncertainty, which could affect fiscal and monetary policy.

Looking Ahead 

As the year progresses, investor focus may shift to the fourth quarter, which is historically a period of strong market performance. However, a cautious approach is warranted, given the combination of elevated stock valuations, economic headwinds, and election uncertainties.

In conclusion, while September's market momentum was positive, the outlook remains mixed. Investors should keep a close eye on evolving economic conditions and potential risks as they navigate the final quarter of 2024.