Latest / Markets with Megan: A Quick Financial Markets Update / Positive Yield Curve Returns: What It Means for Investors | Episode 176 | 10-01-24

Transcript

Positive Yield Curve Returns: What It Means for Investors | Episode 176 | 10-01-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: We've officially put the third quarter of 2024 in the books.
• 0:04
  Megan Horneman: It is Tuesday, october 1st, and this is Markets with Megan.
• 0:08
  Megan Horneman: We wanted to discuss just a kind of a recap of what happened in the third quarter.
• 0:12
  Megan Horneman: We came into the quarter with a lot of economic uncertainty and what we saw by the end of the quarter was the Federal Reserve delivering on aggressive rate cuts.
• 0:21
  Megan Horneman: It was the first rate cut since 2020 at 50 basis points.
• 0:25
  Megan Horneman: We saw the yield curve actually turn positive as well for the first time since 2022.
• 0:31
  Megan Horneman: And we saw volatility in the equity market spike since the most we've seen since the second quarter of 2022.
• 0:39
  Megan Horneman: So let's just touch on some of the key points from an economic and an asset class perspective.
• 0:45
  Megan Horneman: From an economic standpoint, inflation continues to ease On a three-month annualized basis.
• 0:50
  Megan Horneman: The core level that the Fed prefers to look at that actually is now at a 2.1% basis, so it's getting much closer, basically, at the Fed's target rate.
• 1:00
  Megan Horneman: Manufacturing continues to be under a lot of pressure, still contracting.
• 1:06
  Megan Horneman: It's been contracting for 21 out of the past 22 months.
• 1:09
  Megan Horneman: The labor market has shown signs of cracking and that's why the Fed was forced to cut interest rates in September.
• 1:16
  Megan Horneman: We saw much fewer jobs in the month of August and then we saw the prior two months actually revised down by 86,000.
• 1:26
  Megan Horneman: Housing's gotten a tad bit of a boost from a confidence perspective because we've seen a big decline in the mortgage rate.
• 1:33
  Megan Horneman: The mortgage rate is down over almost 100 basis points from its high to 6.1% to end the quarter.
• 1:41
  Megan Horneman: So sentiment there has increased from the home builders.
• 1:44
  Megan Horneman: But we're still seeing weakness on the sales level.
• 1:48
  Megan Horneman: From an equity perspective, we started to see some broadening out in the equity market rally.
• 1:53
  Megan Horneman: It wasn't all US and technology anymore.
• 1:57
  Megan Horneman: In fact, if you look at the MSCI All Country World Index, excluding the US, that was outperformed to the NASDAQ, which has been our tech-heavy kind of winner this year, by over 6% Value as well.
• 2:11
  Megan Horneman: If you look at the Russell 3000 value, it outperformed the Russell 3000 growth by about 300 basis points.
• 2:18
  Megan Horneman: The Magnificent 7 that everyone's loved this whole year they've lagged.
• 2:22
  Megan Horneman: Actually, four of the seven MAG7 stocks were lower for the quarter and NVIDIA posted its first quarterly loss since the fourth quarter of 22.
• 2:32
  Megan Horneman: From a fixed income perspective, we've already said the yield curve is now positive.
• 2:35
  Megan Horneman: We did see that bonds are on their pace for their second consecutive quarterly rally.
• 2:41
  Megan Horneman: All of the sectors in fixed income were positive, but it was led by long-term treasuries as well as investment-grade debt.
• 2:49
  Megan Horneman: On the commodity front, it was higher as a whole the index and that was really led by the precious metals.
• 2:55
  Megan Horneman: Gold rallied with the Fed's rate cut and the economic uncertainty.
• 3:01
  Megan Horneman: That is really the recap we've got here of the third quarter.
• 3:04
  Megan Horneman: We're going into the fourth quarter.
• 3:05
  Megan Horneman: There's a lot of uncertainty here coming in from a geopolitical standpoint.
• 3:09
  Megan Horneman: We've got an election here in the US and a lot of economic uncertainty.
• 3:13
  Megan Horneman: So we'll welcome some of the rally and the news that we got in the third quarter.
• 3:17
  Megan Horneman: Let's see if we can finish out the year on a strong note as well.
• 3:21
  Megan Horneman: We'll be back this week with some more economic information for you and we'll round out this week with the employment report, which is going to be very important to gauge the Fed's next steps at their November and December meetings.
• 3:34
  Megan Horneman: That's all we got.
• 3:35
  Megan Horneman: If you like this, please hit subscribe like hit that alarm bell.
• 3:38
  Megan Horneman: If you would like to see additional podcasts our history of podcasts you can go to M.
• 3:46
  Megan Horneman: Thank you.