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Global Equities:

Stocks got more good news from the Friday jobs report, which provided confidence to investors that the Federal Reserve may be reigning in inflation without triggering a recession.

The long-awaited Fed rate cuts finally commenced in September, with the central bank electing to cut rates to a range of 4.75-5% after being widely criticized for not cutting rates in July.

The recent selloff in global markets has triggered some concerning headlines, being the biggest drop in Japanese stocks since 1987 and the highest reading of the VIX index (a measure of volatility and fear) since the COVID-19 pandemic.

When the Federal Reserve paused on rate hikes roughly a year ago, the consensus view of the market, economists, and even Fed officials was that rate cuts would occur sometime in the second quarter of 2024.

Hopes for a first-half 2024 rate cut quickly faded during the second quarter as the Fed repeatedly stressed its desire to see more sustained progress on inflation.

When we penned our Annual Outlook, we noted that markets were beginning to return to a semblance of “normalcy” as the effects of pandemic-era rate cuts and subsequent hikes from the Federal Reserve (the “Fed”) were poised to unwind.

US stocks are on a remarkable run, with both the Nasdaq Composite and S&P 500 trading at all-time highs and the Dow Jones Industrial Average just below the record 40,000 level attained in mid-May 2024.

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