September 28, 2024 Market Update

Jim Picerno here, The Milwaukee Company’s director of analytics – I’m filling in for Andy while he’s on vacation. 

The U.S. stock market shows no signs of taking a holiday from its recent rally.  The S&P 500 Index rose for a third-straight week, reaching a new record close on Thursday before pulling back slightly on Friday.  The 0.6% weekly advance, however, was the slimmest of the three, which may be a sign that the bulls are running out of steam, at least for now.  For the year to date window, however, stocks continue to run hot: the S&P ended the week with a sizzling 20.3% advance.

The bond market was essentially flat for the week, based on Vanguard Total Bond Market ETF (BND), a proxy for investment-grade corporate and government bonds.  But the sleepy week masks the fact that fixed income as an asset class has been on a tear since May.  The rally has repaired much of the damage from the 2022-2023 bear market for bonds.  Year to date, fixed income is posting a respectable 4.8% total return.  Bonds, in sum, are no longer a dirty word for portfolio strategies.

In economic news, the week was mostly kind to the growth narrative.  Highlights include U.S. weekly jobless claims, which fell again through September 21st, slipping to the lowest level since mid-May.  This leading indicator for the labor market continues to paint a relatively upbeat outlook and appears to suggest renewed labor market strength.  Although the rate of hiring has slowed recently, payrolls are still rising at a pace that implies that the economic expansion will roll on in the near term. 

Meanwhile, the Bureau of Economic Analysis reconfirmed that the economy rose by a robust 3.0% in the second quarter (annualized rate for gross domestic product, a.k.a. GDP).  Even better, the Atlanta Fed’s widely-followed GDP nowcast for Q3 has been revised up slightly to a 3.1% increase.  There’s a month to go before the government publishes its initial estimate of Q3 GDP, but the current outlook remains encouraging.

Bottom line: the case for arguing that the U.S. fell into a recession recently, or that an economic contraction is imminent, is a bit thin.  Let’s see if next week’s payrolls report for September suggests otherwise.