Highlights

• US Election Impact on Markets 
• Market digests September rate cuts
• Gold & Bitcoin hit new highs 

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US Markets

As the 2024 presidential election approaches, U.S. equity markets have seen some volatility, especially toward the end of October. For just the second time this year, U.S. markets posted a negative return, with the S&P 500 down 0.91% for the month. Despite this, 2024 has been a standout year for U.S. equities, with the S&P 500 delivering a 19.62% year-to-date return through October 31, 2024².

By sector, Financial Services (+2.56%) led market returns in October, buoyed by an unexpected 50 basis point rate cut by the Federal Reserve on September 18th. Healthcare (-4.64%) was the biggest laggard, as investors remain cautious, awaiting more clarity on how the upcoming election might affect one of the most politically sensitive sectors.

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US Election

Markets are no strangers to short-term volatility during election seasons, as heightened uncertainty often surrounds potential changes in the presidency and the balance of power in Congress. Investors typically react to shifting policy expectations, regulatory outlooks, and economic priorities, all of which can influence market sentiment. The 2024 election cycle, with its unique set of challenges and evolving political landscape, appears to be no exception, as we’ve already seen increased market fluctuations in response to the broader uncertainty.

From a broader perspective, while election outcomes may cause temporary market fluctuations, they have historically done little to disrupt the fundamental strength of the U.S. economic engine over the long term. That said, significant changes in fiscal policy can have a more meaningful impact on markets. As such, staying informed and closely monitoring these potential policy changes is crucial for investors navigating the post-election landscape.

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US Economy

U.S. inflation has cooled to its lowest level in over three years, at 2.4%, prompting the Federal Reserve to make a somewhat unexpected 50 basis point rate cut in September. This cut brought,  bringing the rate down to 5.0% after a 14-month hold at 5.50%. How inflation responds to this rate adjustment will play a key role in shaping the Fed's future policy decisions. The next potential rate cut announcement is set for November 7th³.

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Global Markets 

International markets fell for the second consecutive month, dropping 4.9% in October, as investors continued to favor U.S. equities. Developed markets led the decline, down 5.5%, while emerging markets also faced headwinds, slipping 4.4%.

Despite these recent challenges, global equities remain up 6.2% year-to-date, though they continue to lag significantly behind the stronger performance of U.S. markets⁴.

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Fixed Income

Following the September rate cut, fixed income performance dipped slightly in October, with long-term bonds being the most affected. Despite this, fixed income remains positive for the year, with the U.S. Aggregate Bond Index up 1.94% through the end of October⁵.

After an initial drop, rates for both 1-year and 10-year Treasuries have edged higher this month, as investors anticipate the possibility of higher rates in the medium term. This shift is driven by continued positive economic data and concerns over ongoing government spending⁶.

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Alternatives

Gold and Bitcoin have both reached all-time highs in recent months, as investors seek alternative asset classes amid geopolitical uncertainty and global currency risks. Gold rose 4.0% in October, contributing to its impressive 31.6% year-to-date return as of October 31⁷. Bitcoin saw an even sharper increase, surging 10.2% in October and posting an extraordinary 71.3% gain for the year⁷.