Looking Back at the Markets in September and Ahead to October 2024

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September was a solid month for investors, capping off a strong quarter for markets. Falling interest rates helped support stock returns, with the S&P 500 and Dow Jones Industrial Average setting new record highs during the month. Even bonds were up, marking five straight months with positive fixed income performance.

Looking Back

Interest rates and the Fed. Interest rates were key in September, as the Fed cut the federal funds rate by 50 basis points (bps) at its September meeting. This was the first interest rate cut in more than four years and signals a shift away from restrictive monetary policy from the central bank. The 50-bp cut was larger than most economists expected but aligned with market pricing heading into the meeting. Markets rallied following the announcement, as lower interest rates are generally viewed as a tailwind for investors and the economy.

Solid economic fundamentals. While the Fed was the major story in September, the economic updates released during the month were largely positive. Hiring rebounded in August and the unemployment rate fell to 4.2 percent during the month. Consumer and business spending came in above economist estimates in August, and we even saw continued progress in getting inflation back down to the Fed’s 2 percent target.

Looking Ahead

More rate cuts. The 50-bp cut in September was welcomed by investors, who now expect to see additional rate cuts at upcoming Fed meetings. Futures markets are pricing in at least two more interest rate cuts at the Fed’s meetings in November and December, and further cuts are expected in 2025. This will be an important area to monitor in the months ahead, as any changes to interest rates can immediately impact markets.

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