DeutschStock Markets on the Rise
The S&P 500, one of the most well-known US indices, reached a new record high, closing the third quarter with a gain of 5.89%. Other major indices also showed strong performance, although the tech-heavy Nasdaq couldn’t keep up with the broader market and rose by only 2.76%. Notably, the so-called “Magnificent 7” stocks, which include companies like Apple, Microsoft, and Nvidia, experienced significant volatility but recovered after interim declines.
The Role of the US Federal Reserve
A key influencing factor on the markets was the interest rate policy of the US Federal Reserve. In September, the Fed cut key interest rates for the first time since 2020 by 50 basis points. This decision came as a surprise to many, as the market had initially anticipated a 25-basis-point cut. The backdrop was a declining inflation rate and a somewhat weaker economic situation. The lower rates were welcomed by the markets, as they offer companies cheaper financing options and can thus stimulate growth.
Fluctuations and Uncertainties
Despite the strong performance, there were also periods of uncertainty. Especially in August and early September, setbacks occurred, particularly in large tech stocks. Nvidia’s share price, for example, declined despite the company delivering impressive quarterly results. A possible reason for this could be that high expectations for the “Magnificent 7” companies were already priced in, so even good news failed to trigger significant price jumps.
Another source of uncertainty was the rising volatility. The Cboe Volatility Index (VIX), regarded as a barometer for fluctuations in US markets, reached its highest level since the pandemic in August. This indicates that many investors are nervous and want to be prepared for possible market corrections.
Value and Small-Cap Stocks in Focus
It was also interesting to observe the development of value and small-cap stocks. While growth-oriented tech stocks dominated in recent years, companies with solid valuations and smaller market capitalizations increasingly stood out. Small-cap stocks outperformed large caps in the third quarter, and value stocks achieved higher returns than growth stocks. This trend suggests that investors are focusing more on stability and substance rather than just high growth rates.
Developments in the Bond Market
Besides the stock markets, the bond market was also in motion. US Treasury bond prices rose, leading to declining yields. Ten-year bonds, in particular, benefited from the Fed’s rate cut, and the yield curve reverted after two years. Typically, higher interest rates for long-term bonds are a sign of confidence in long-term economic development.
Looking Ahead
The coming period remains exciting, especially with the US presidential elections in November. Markets often react sensitively to political events, and the elections could lead to further fluctuations. Historically, however, stock markets have performed well in the long run, regardless of who occupies the White House. Investors should, therefore, not be rattled by short-term turbulence and maintain a long-term focus.
Summary
In summary, the third quarter of 2024 was characterized by strong stock gains but also increased volatility. The Fed’s rate cut and the solid performance of value and small-cap stocks gave the market a boost, while uncertainties and fluctuating prices continued to present challenges for investors. For the coming months, it remains crucial to closely monitor the markets and remain flexible to adapt to new developments.