3rd Quarter Market Update
3rd Quarter Market Outlook
It is our view that the economy is still relatively resilient and will remain such for the 3rd quarter of 2024. Note the word resilient, not strong, we are not absolutely bullish, but we don’t see any major indicators for a materially weakening in the economy for the 3rd quarter. Our reasoning behind this comes from a few factors including Economic resilience, Federal Reserve policy, and technical analysis.
Economic Resilience
As we look at the overall economy, there seems to be signs of resilience in many places. Employment is at a good level, consumer confidence is strong, and CPI is cooling down. These factors imply that the “average joe” is keeping up with the current economy. Some would disagree and state that job data is over inflated due to false numbers and illegal aliens taking jobs and others see many people struggling to buy groceries and squawk at the consumer confidence reports. Although these concerns may be true, the so called “heavy hitters” in the stock market, often use indicators such as these to inform their market moves. When these large corporations see bright economic data, it creates demand and thus a bullish environment for the market.
Federal Reserve Policy
Another important factor in our market outlook is the movement of the Fed. On the tailwinds of last week’s softening inflation data, many are predicting a dovish fed and potential rate cuts as soon as September. Although that is not out of the picture, Cornerstone is of the opinion that we will not see the Fed cut rates until at least November. If the Fed cuts in September, they run multiple risks; 1. They cut too early allowing inflation to heat up again. 2. Their cuts are perceived as a political move thus eroding credibility. Neither of these scenarios are favorable for the Fed, thus it seems likely that we will see “a whole lot of nothing” until November. Regardless of rate cut timing, it is imperative to be in the market before these cuts are confirmed. The stock markets are forward looking and thus once an event occurs, it is too late to maximize gains.
Technical Analysis
Finaly it is important to address the state of the markets from a technical standpoint. The S&P 500, one of the most important indices from a technical standpoint, has been in a clearly defined uptrend channel since mid-April 2024. The bottom support of this channel is just under 5,600 which would take less than a 1% drop to retest. Additionally, the 50MA is 4.5% beneath the current price which shows strong support could hold prices up with even a small pullback. These signs, as well as the Stochastic Oscillator colling off slightly imply the current bull market could continue for some time.
In addition to the S&P 500; small cap, mid cap, industrials, and technology have had quite the run, breaking to new highs which tends to cause support to form at the former highs. New highs tend to signal strength and a bullish market.
Conclusion
All this data causes us to be cautiously optimistic. When market prices have sharply risen and seemingly outpaced the economic data it is cause for concern, however there is no reason to predict a bubble pop in q3 this year. We will reassess again for Q4 and I have a feeling we may be more cautious at that point. For now, we proceed fully invested.
OneAscent Financial Services, LLC (“OAFS”), d/b/a The Cornerstone Financial Group, is a registered investment adviser with the United States Securities and Exchange Commission. OAFS does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by OAFS or any unaffiliated third party. OAFS is neither an attorney nor accountant, and no portion of the presented content should be interpreted as legal, accounting, or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly