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Market Update & Investment Commentary
Data as of 09/30/2024 (unless stated otherwise)
US Markets
The “Magnificent 7” stocks (AAPL, AMZN, GOOG/GOOGL, META, MSFT, NVDA and TSLA) experienced a drawdown in the third quarter. These companies are now up 35% year-to-date and have contributed 45% of the overall S&P 500 returns (vs. 61% as of our last update). Looking at this with a “glass half full” perspective, we see this broadening in the market as a reduction in overall volatility because a greater number of stocks are contributing more to overall returns, so a drop in one of the largest stocks has less of an effect on US large-cap indices.
Small and mid-cap equities, which benefit from lower interest rates, have rallied (small caps, as measured by the S&P 600, were up around 10.1% in Q3). We have a slight tilt toward small and mid-cap equities in our portfolios.
Below are the total returns for major US asset classes through 9/30/2024:

International Markets
After a very impactful combination of monetary, fiscal and capital market stimulus measures in China, Chinese equities are up nearly 30% year-to-date! This is great news for the international equities in our portfolios, particularly Emerging Markets. Further, if the US Dollar continues to depreciate against international currencies (as is expected during rate cutting cycles, particularly if our rate cuts exceed those of other central banks), then US investors would see an additional boost to their international equity returns in US Dollar terms. See chart below:

Economy
Generally, the economy still appears to be strong, and there doesn’t appear to be any excessive imbalances across cyclical sectors. Residential investment, Business fixed investment, Light vehicle sales and Total business inventory/sales ratios all very close to their long-term averages. This doesn’t mean we couldn’t have a recession, as an unanticipated shock (such as geopolitical) could still cause problems for our economy. The second quarter Gross Domestic Product (GDP) reading (both year-over-year and quarter-over-quarter annualized) came in around 3%, which is above the trend growth of 2.1% recorded between January 2001 – December 2019.
Source: Bureau of Economic Analysis and Census Bureau
We have seen some softening in the labor market with monthly payroll gains coming in at 142,000 for the September reading, down from a peak of 310,000 in March of this year. On the other hand, we’ve also seen 16 straight months in which wage growth has exceeded inflation (4.1% year-over-year wage growth in August vs. 2.6% headline CPI), and the current unemployment rate of 4.2% is still well below the 50-year average of 6.2%. That’s all good for consumer spending, which makes up around 2/3 of GDP.
Source: Bureau of Labor Statistics, Federal Reserve Bank of Atlanta
On inflation, Headline CPI was 2.6% in August, with Auto Insurance and Shelter still being the largest contributors. However, the 30-year mortgage rate (per Freddie Mac) is down to about 6.15% from a peak of 7.8% about a year ago, and gas prices have also come down significantly, both of which should help moderate inflation going forward.
Source: Bureau of Labor Statistics, Freddie Mac
As inflation continues to come down and the labor market softens, we’re likely to see the Federal Reserve continue with modest rate reductions after the first cut of 0.50% in September (to a current range of 4.75% - 5%). We could see a pause in rate cuts if we see a resurgence in inflation, and could see more aggressive cuts if there is some other shock to the economy. Historically, both equity and fixed income markets have responded positively following the start of a Fed cutting cycle after a “soft landing”. See the charts below.

Summary
You’ve heard us say it before: Don’t try to time the market! Time IN the market is far more important than timing OF the market. It’s so hard to predict the best time to exit and re-enter your investments, because markets can be unpredictable in the short-term. However, in the long run, we continue to believe diversified, strategically allocated portfolios will respond primarily to the fundamentals, and that investors with a more disciplined, long-term approach will prevail. Take a look at the slide below, which shows the annualized S&P 500 returns over the past 20 years, vs what your return would have been if you missed the best days in the market. As always, we are ready to talk to you about any questions or concerns, and hope you have a wonderful holiday season ahead!

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Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Columbus Wealth Management, [“CWM”]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CWM. CWM is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.cbuswm.com. Please Remember: If you are a CWM client, please contact CWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please also remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
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