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Market Commentary
September 10, 2024
Like in August, the equity market broadly corrected in the first few trading days of September, mainly due to renewed macro concerns. While aggregate consumer spending remains healthy, cracks continue to form. And another weak employment report intensified investor fears that the Federal Reserve has, once again, missed the mark by remaining restrictive for too long. During his August 23 Jackson Hole speech, Chair Powell all but guaranteed the Federal Reserve would start reducing rates in September. As a result, fed funds futures imply a 71 percent probability of a 25 basis point rate cut and a 29 percent probability of a 50 basis point rate cut.
Diversification will remain vital as investors balance prospects for decelerating economic growth with looser monetary policy and an uncertain fiscal agenda. We believe a possible economic downturn will be relatively shallow and shortly give way to a renewed but modest expansion. Still, there is potential that higher tariffs and stricter immigration will diminish the growth upside (while higher productivity could be a boon). If passed, the two presidential candidates’ diametric tax proposals will also notably impact corporate earnings and financial markets. Regarding strategy, portfolios continue to emphasize attractive growth areas within technology, as artificial intelligence spending remains strong, and there are signs demand is bottoming in software, networking, and storage. Healthcare is our most favored non-cyclical exposure, with medical device and health services stocks especially compelling.
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