Happy Birthday to the Bull!
October 12, 2024 marked the official two-year birthday of the bull market that started on the same day in 2022. In case you removed it from memory, 2022 was a vicious year with a 25% stock market decline and the worst bond market performance in our history. Most experts and economists were sure we were going into a recession, only for the opposite to occur.
Since then, the S&P 500 has been up more than 60%. The good news is that this bull has a way to go to hit averages. Since 1950, the average bull market lasts about 5 ½ years and has increased more than 180%. How long this bull market will last is anyone’s guess, but the economic and corporate backdrop still looks solid.
The third quarter of 2024 ended with strong returns across most major asset classes, despite some bouts of volatility (we’re looking at you, August). As you can see from the chart below, every major asset class listed is positive year-to-date as of September 30. The pattern fill represents the third quarter’s returns and the solid fill, the rest of the year.
Not only did the broad markets perform well, but every sector in the U.S. is now in positive territory year-to-date with four of the eleven in line with or outperforming the S&P 500.
Economy
Fourteen months from its last interest rate hike, the Federal Reserve (the Fed) began its cutting cycle with a 50-basis point (0.50%) move in September. With unemployment increasing from a low of 3.4% in April 2023 to 4.2% today, Fed officials do not welcome any further weakening in the economy. Inflation has normalized, and real GDP is up 3% year over year as of the second quarter of 2024. All of this means the Fed doesn’t have to aggressively cut interest rates but can continue its path to normalization. Officials can cut gradually, and their decisions could be a big tailwind for the economy and markets as we head into 2025.
The election
Anyone else tired of the topic yet, or is it just us? We have spoken and written extensively about our strong recommendation to keep politics out of investing, but if you need more proof, we will rest our case with the chart below.
Using the S&P 500, if you invested only when a Republican was president and went to cash when a Democrat was in office, your $10,000 would have grown to just $83,360 by the end of the first quarter of 2024. Conversely, if you invested only during Democratic presidencies, your $10,000 would have grown to $414,703. However, if you ignored political factors entirely and stayed invested throughout, your $10,000 would be worth an astonishing $3.46 million by the end of Q1 2024! This illustrates the importance of maintaining a long-term, non-partisan investment strategy.
The market likes divided government
Surprisingly, the best average stock market performance has occurred with a Democratic president and Republican Congress, although there is a relatively small sample of years when that’s happened. Contrary to what politicians want you to think, full control by one party has not yielded the best returns. In fact, some of the lowest average returns come from scenarios where one party has a complete sweep. This suggests that a balanced political landscape may be more conducive to market growth.
Thank you, as always, for allowing us to be of service. It is an honor and a privilege to be a part of your life journey. If there is anything we can do for you, please feel free to reach out.
With gratitude,
Anne, Atricia, and your Curo Team