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We are delighted to share our September Market Outlook which provides you with our current thinking on the economy, markets and portfolio positioning. In addition, we’ve shared the key economic statistics that we are watching closely.

Economy & Markets

  • Real GDP was revised higher for the second quarter rising to a 3.0% annualized rate. Consumer spending remained the driver as spending on both goods and services exceeded expectation
  • Economic growth in the first half of the year came in at a strong 2.2%. However, this growth rate is likely to moderate due to a slowing labor market and weakness in retail sales for households in lower income group.
  • The latest report on inflation showed that CPI eased to a three-year low. The August CPI rose 2.5% from a year earlier, down from 2.9% in July. Core inflation held steady at 3.2%. A growing economy coupled with declining inflation has raised hopes for interest rate cuts this Fall.

Equities

  • The S&P 500 finished August on a high note, increasing 2.4% for the month and building on the solid year-to-date totals. As of August 30, the S&P was higher by more than 19.5% and the Nasdaq composite was higher by 18.6% for the year. Volatility continues to rise, which is not surprising during the seasonally challenging months of August and September. 
  • Through August 30, 10 of 11 economic sectors have increased by more than 10%. During the 3rd quarter, the best performing sectors have been financials, real estate, and utilities; each sector benefitting from expected lower interest rates ahead, but also highlighting the increasing breadth and broader participation across the U.S. stock market.

Fixed Income

  • The yield curve continued to steepen as the market priced in a more aggressive rate easing cycle by the Fed. Expectations continue to point to an anticipated FOMC rate cut in September.
  • Credit spreads tightened, but are still not showing any signs of stress, signaling comfort with the economic outlook.

Employment

  • August’s unemployment report confirmed for investors that the labor market is slowing but had not collapsed which calmed the fears unleashed after the soft July report. The unemployment rate declined to 4.2% from 4.3%.
  • One encouraging feature of the jobs report was an increase in the average workweek to 34.3 hours, which one economist equated to the hiring of an additional several hundred thousand workers. Wages also increased by more than expected.

Federal Reserve

  • The Fed meets in mid-September to decide whether interest rates will be reduced by 25 or 50 basis points. Investors believe the Fed will make additional cuts at the November and December meetings amounting to at least 75 bps in 2024 and 225 bps by year-end 2025.
  • Chairman Powell, in his comments at Jackson Hole, noted that the inflation rate had receded significantly from the highs of Spring 2022. He indicated that the more pressing problem now is the slowing employment market which justifies lowering interest rates.

Issues to Watch

  • Traditionally, the Presidential race heats up once we are past Labor Day. The race is focused on those few states where each candidate believes they can swing enough voters to capture the electoral college.

A chart from Bloomberg depicts economic metrics for September 20241Data provided by Bloomberg. Metrics are as of month-end or most recent publication
2Provided by U.S. Real GDP Economic Forecast Survey Median 
3Provided by World Real GDP Economic Forecast Survey Median 
4Provided by Bloomberg Intelligence Forecast 
5Provided by World Probability Forecast 
6Arrows represent a month-over-month change


A chart depicts index returns for September 2024

Asset Allocation / Tactical Positioning - September 2024

A chart depicts asset allocation / tactical positioning for September 2024

1Equity tactical weights are relative to the Cambridge Trust Core Equity allocation and is comprised of 80% S&P 500 and 20% MSCI AC World ex-U.S. Index. 
2Fixed Income tactical weights are relative to the Cambridge Trust Core Taxable allocation and is comprised of 100% Barclays Intermediate Gov/Credit Index. 
3Below investment grade holdings include high yield and emerging market debt mutual funds. Represents an out-of-benchmark allocation that will be reflected as an overweight position relative to the Barclays Intermediate Gov/Credit Index if any allocation is held. 
4Alternative tactical weights represent an out-of-benchmark allocation that will be reflected as an overweight position when utilized and neutral position when not. 
5Direction arrow highlights any recent changes of the overall allocation after a recent tactical asset allocation or strategy change. Last changes were made at July 2024 Asset Allocation Committee meeting.


Cambridge Trust Wealth Management is a division of Eastern Bank. Views are as of August 2024 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, Eastern Bank Wealth Management, Cambridge Trust Wealth Management or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance. Investment Products are not insured by the FDIC or any federal government agency, are not deposits of or guaranteed by any bank, and may lose value.