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The September labor report beat expectations, with the unemployment rate falling to 4.1% and 254,000 jobs being added to payrolls. Worries that recent months’ jobs figures indicated economic deterioration were set aside for the time being. Dockworkers on the US East Coast and Gulf of Mexico ports suspended their strike until at least January 15 and returned to work. Oil prices rose due to the Middle East conflict but stayed below levels seen in August. The ISM’s US services PMI jumped higher into expansion while the US manufacturing PMI fell further into contraction. Construction spending declined, with spending on single-family homes falling 1.5% on the month.

This week we’ll be looking at consumer credit on Monday; the NFIB optimism index and the US trade deficit on Tuesday; wholesale inventories and September FOMC minutes on Wednesday; initial jobless claims and the consumer price index on Thursday; and the producer price index and consumer sentiment on Friday. Our strategists and portfolio managers cover the latest geopolitical, market and economic trends in our Insights section.

What

October 7, 2024

Weekly

October 2022

Additional resources

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Inflation dashboard

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Election Watch 2024

Our fixed-income taxable multi-sector portfolios are underweight investment grade corporates, high yield, commercial mortgage-backed securities (CMBS), US Treasuries and agencies. We are overweight MBS, and emerging markets. Tax exempt munis are attractive for investors in the top tax brackets in non-qualified accounts, despite currently rich ratios to Treasuries. We are neutral duration and remain positioned for a longer-term steepening of the yield curve.

Fixed income

Domestically, we continue to prefer defensive, dividend-paying stocks and are slightly underweight rate-sensitive large growth stocks. We’re overweight small-cap growth and large-cap value. Outside the US, we’re overweight and constructive on emerging markets.

Germany’s economy continued to sputter, with stagnation in both services and manufacturing while the investor outlook dimmed. China’s central bank embarked on a monetary stimulus program, which seemed more concerned with investor confidence than spurring consumer-led growth. Fiscal stimulus might help with that. Oil prices eased in September despite Middle East tensions. Gold rose steadily over the course of the month. Geopolitical risks remain a concern due to ongoing wars and fresh conflicts in Ukraine and the Middle East.

The Federal Reserve finally initiated rate cuts at the September FOMC meeting. The 50-basis-point cut, which surprised some who expected to see a 25 basis points move, came after a series of weak employment numbers indicated that the labor market was rapidly cooling. The equity market cheered the move, rising to fresh highs over the course of the month. Inflation moderated, further supporting the case for the Fed to cut rates. Mortgage rates declined in September and refinancing surged, while housing activity ticked higher.

Economies

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December

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Job Openings and Labor Turnover

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Emerging Markets

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Consumer Price Index

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Federal Open Market Committee

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Global Financial Crisis

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Eastern Daylight Time

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Mortgage-Backed Securities

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Standard and Poor's

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Institute of Supply Management

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United States

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Emerging Markets

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Personal Consumption Expenditures

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Automatic Data Processing

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Mortgage-backed Securities

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Bank of England

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European Central Bank

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Purchasing Managers Index

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Emerging Markets

US economy

International economy

US Equity

Positioning

London’s FTSE fell on the month, as did the Nikkei, while the Euro Stoxx 50 closed little changed and the MSCI All Country World ex-USA Index grew. Chinese shares surged late in September on the strength of monetary stimulus by the nation’s central bank.

Stocks shrugged off a weak start to the month as optimism for a soft landing grew in the wake of the Federal Reserve’s 50-basis-point rate cut. Major US indexes rose to fresh highs later in September. Within the S&P 500, Consumer Discretionary outperformed the most, followed by Utilities and Communication Services. Energy, Health Care and Financials underperformed the most.

International Equity

The Bloomberg US Aggregate Index gained 1.34% in September, capping a strong quarterly gain of 5.2% for a total 4.45% year-to-date. The long-inverted 2s/10s Treasury yield curve normalized firmly, ending the month at 3.66% and 3.81% respectively for a 15 basis point differential. Markets mostly took the somewhat unexpected 50 basis point FOMC interest rate cut in stride, having mostly priced in an aggressive initial cut. Between now and the end of the year, US Treasury rates could be volatile as markets process earnings, consider possible US election outcomes and monitor global tensions.

Positioning

Liquidity

Equities

Economies

Liquidity

Fixed Income

Equities

Economies

October 2024

Monthly

While money market yields are compelling, maintain a bias to lengthen duration where there is value. Take a balanced approach to credit given tight spreads and strong fundamentals, but a softening economy and concerns about weakening labor markets. Use mortgage-backed securities where possible to capitalize on available carry and prepare for potential benefit of future spread compression.

Relative to longer-term fixed income, the 0-3-year part of the yield curve is attractive. These themes are guiding our investment views in the space:

Positioning

The Federal Open Market Committee (FOMC) cut the target range of the federal funds rate by 50 basis points to 4.75-5.00% at their September meeting. This displayed a level of confidence that inflation is on a sustainable path to 2% and emphasized efforts to achieve a soft landing and avoid a recession. There was notably one FOMC member who dissented from the group and voted for a cut of only 25, but Chair Jerome Powell emphasized that there is general consensus that more cuts will occur later this year. The reduction of the Fed’s balance sheet continues. As this somewhat counteracts the impact of rate cuts designed to loosen monetary policy, we expect that to slow and eventually stop later this year.

Equities

Fixed Income

Liquidity

Economies

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Chief Information Officer

Economies

Liquidity

Fixed Income

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Mortgage-Backed Securities

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Commercial mortgage-backed securities

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Gross Domestic Product

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Emerging Markets

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Gross Domestic Product

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Emerging Markets

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Standard & Poors

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Standard & Poor's

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Price-to-Earnings

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Earnings Per Share

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Price-to-Earnings

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United States

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United States

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Personal Consumption Expenditures

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United Auto Workers

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Gross Domestic Product

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United States

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Federal Open Market Committee

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United States

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Producer Price Index

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European Central Bank

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second quarter

US fixed income

International

Overall, the Global Bond Aggregate Index generated a 1.88% total return for the month. Currency appreciation against the USD accounted to roughly 32% of the index’s monthly total return. As measured by the Bloomberg US Dollar Index (BBDXY), the US dollar sustained a -3.24% loss during the reporting period. Emerging market debt had another strong month with a 2.45% return based on Bloomberg Emerging Markets Seasoned ex Aggregate/Eurodollar Index.

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Organization of the Petroleum Exporting Countries

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Federal Open Market Committee

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Federal Open Market Committee

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European Central Bank

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International Monetary Fund

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European Central Bank

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Mortgage-Backed Securities

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Union Bank of Switzerland

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Investment Grade

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Capital Expenditures

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Emerging Markets

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Morgan Stanley Capital International

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Personal Consumption Expenditures

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High Yield

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Commercial Mortgage-Backed Securities

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Artificial Intelligence

Read our Fixed Income committees’ current views and positioning >

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December

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United Auto Workers

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Overweight

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Probability Risk and Impact System

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Johnson & Johnson

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National Association of Home Builders

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National Federation of Independent Business

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Organization for Economic Cooperation and Development

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Earnings Per Share

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Bank of England

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Gross Domestic Product

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Bank of Japan

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Standard & Poor's

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Standard & Poor's

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United States

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Morgan Stanley Capital International

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Europe, Australasia, and the Far East

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Gross Domestic Product

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Purchasing Managers Index

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Federal Reserve

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fourth quarter

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Bank of Japan

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Purchasing Managers Index

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Quarter on Quarter

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Producer Price Index

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Consumer Price Index

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Kansas City

Labor market rebounds

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Institute of Supply Management

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Job Openings and Labor Turnover Survey

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Year over year

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United Kingdom

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United States

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Consumer Price Index

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Artificial Intelligence

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Consumer Price Index

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Environmental Impact Assessment

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Bank of England

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Mortgage Bankers Association

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Financial Times Stock Exchange

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United States

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United States

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Gross Domestic Product

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Fear of missing out

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United States

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Federal Open Market Committee

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United States

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Job Openings and Labor Turnover Survey

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United States

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National Federation of Independent Business

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United Kingdom

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United Kingdom

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Thousand

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Personal Consumption Expenditures

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Institute of Supply Management

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Mortgage-Backed Securities

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Federal Open Market Committee

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Leading Economic Index

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United States

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Federal Reserve

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Financial Times Stock Exchange

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United States

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United States

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United States

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United States

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Gross Domestic Product

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Purchasing Managers Index

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Institute of Supply Management

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United States