Weekly Market Recap by Freedom Family Office: Strong Labor Market and Global Uncertainty Mark the Start of Q4
Market Overview:
As we move into the year’s final quarter, volatility took center stage in the U.S. markets. Despite a strong performance earlier in 2024, concerns around the labor market, geopolitical tensions, and the upcoming U.S. presidential election added to investor uncertainty. However, the markets found some stability by the end of the week, thanks to a strong U.S. jobs report and the swift resolution of the East Coast port strike.
At Freedom Family Office, we pay close attention to these trends to help our clients navigate the complexities of the market. The S&P 500 gained 0.2% for the week, the Nasdaq edged up 0.1%, and the Dow posted a modest 0.1% increase. Global markets were mixed, with Europe showing gains, hoping for interest rate cuts, and China experiencing a boost from monetary stimulus.
Labor Market Insights:
The U.S. labor market was the standout story this week, with September's nonfarm payroll report revealing that 254,000 jobs were added, far surpassing the forecast of 150,000. Additionally, the unemployment rate ticked down to 4.1%, and last month’s job gains were revised upward, providing a boost to market confidence. This unexpected strength in the labor market tempered expectations for aggressive rate cuts from the Federal Reserve, with investors now predicting more minor reductions of 0.25% at the next Fed meeting.
Geopolitical Tensions and Energy Markets:
Geopolitical risks remain an overhang as tensions in the Middle East flared up, contributing to sharp increases in oil prices. West Texas Intermediate (WTI) crude surged by over 10% for the week, fueled by concerns over potential disruptions in energy supply. While safe-haven assets like gold rose, they later pulled back as markets digested the developments. However, continued uncertainty in the region has kept energy markets volatile, with a potential escalation posing risks to broader global markets.
East Coast Port Strike Resolution:
A positive development that helped buoy markets was the resolution of the East Coast port strike, which had initially disrupted operations at 36 major U.S. ports. The strike ended after three days, following a tentative agreement between dockworkers and port operators, which included a wage hike over the next six years. Although the strike was short-lived, its potential to disrupt supply chains increased concerns earlier in the week.
Federal Reserve and Economic Insights:
The Federal Reserve's next move remains in focus as markets evaluate the potential for further rate cuts. Although the central bank has already enacted a 0.5% cut, the latest labor market strength may prompt a more measured approach. Inflation remains a key concern, with wage growth holding steady at 4.0% year-over-year, which could elevate inflationary pressures. Meanwhile, the core PCE, the Fed's preferred inflation measure, showed a modest increase of 2.7% year-over-year, signaling that inflation is gradually cooling but not entirely under control.
The Week Ahead:
Looking ahead, key economic releases this week include the Consumer Price Index (CPI) inflation data, set to be released on Thursday, October 10, and consumer sentiment reports, both of which will be crucial for gauging the Fed's next steps. Additionally, minutes from the Federal Open Market Committee (FOMC) meeting will be released, providing more insights into the central bank’s thinking. Geopolitical tensions and developments in the energy market will also remain closely monitored as potential risk factors for global economic stability.