As we move through the final quarter of 2024, several key developments are impacting the investment landscape, shaping strategies for investors. Here’s a look at some of the most critical factors influencing the current market and economy.

U.S. Economic Resilience and Inflation Outlook

The U.S. economy continues to exhibit strength despite global uncertainties, with the Bureau of Economic Analysis (BEA) revising GDP growth for the second quarter to 2.3%. This revision reflects stronger-than-expected consumer spending and wage growth, signaling a robust economic recovery from the pandemic downturn​. Additionally, job growth remains solid, with 254,000 new jobs added in September, pushing unemployment down to 4.1%. Wage growth, which increased by 4% year-over-year, further highlights the economy’s stability.

Inflation, while still a concern, is trending down. The core Personal Consumption Expenditure (PCE) index, which excludes volatile food and energy prices, is up 2.7% year-over-year in August, much lower than earlier peaks. As inflation stabilizes, the Federal Reserve’s decision to cut interest rates by 0.5% in September reflects a shift towards supporting job growth​.

Market Movements and Corporate Earnings

Stock markets have seen some turbulence, but overall performance has been positive, with the S&P 500 and Dow Jones benefiting from strong corporate earnings reports. Major companies such as United Airlines and Morgan Stanley reported better-than-expected profits, pushing their stock prices higher. Morgan Stanley’s financial gains, driven by an increase in net interest income and a reduced provision for credit losses, helped the stock rise by 6.5%.

However, not all sectors are performing well. The semiconductor industry has faced challenges, with ASML, a major semiconductor equipment manufacturer, reporting lower-than-expected results. This triggered a 16% drop in ASML’s stock price over two days, contributing to volatility in the tech sector​.

Housing Market Slows Despite Lower Mortgage Rates

The U.S. housing market remains a point of concern for investors. While mortgage rates hit a two-year low in September, total home sales dropped by 2.9%, reflecting ongoing affordability issues for buyers​. Rising interest rates following strong employment data may exacerbate these challenges, as higher mortgage rates could further limit demand for new homes.

Looking Ahead

The combination of resilient job growth, moderating inflation, and corporate earnings has kept U.S. markets relatively stable. However, certain sectors, such as tech and real estate, are facing headwinds. As we head towards the end of 2024, investors will need to keep a close eye on Federal Reserve policy shifts, global market conditions, and corporate earnings reports to navigate the evolving investment landscape effectively​

In summary, the U.S. economy is showing signs of stability, with inflation easing and the labor market remaining strong. However, challenges in specific sectors and global market volatility mean that careful portfolio management and a diversified strategy remain critical for investors moving forward.