September 2024 Market Recap
Last Month in the Markets: September 2024
For the second consecutive month, equity values ended much better than they began. North American equity indexes fell during September’s first week, reaching their lowest points for the month at the end of trading on Friday, September 6th. Starting on the 9th, it was essentially an uninterrupted run of gains over the next three weeks.
The notable events included:
1. August 30th
August concluded with less than positive news as U.S. inflation as core Personal Consumption and Expenditures price index (PCE) increased 0.2% in July and 2.6% in the past year. This news contributed to a decline for equities for the first week of September based on the belief that the Fed might act conservatively with its rate reductions.
2. September 2nd
The first Monday of the month began with Canadian and American equity and bond markets closed for the observances of Labour and Labor Day, respectively.
3. September 4th
The Bank of Canada announced its third consecutive monetary policy update that reduced the overnight rate by ¼ percent (25 basis points). The target has been reduced from its July 2023 peak of 5 percent to 4 ¼ percent.
4. September 6th
The Non-farm Payroll Report from the U.S. Bureau of Labor Statistics (BLS) showed employment increased by 142,000 in August, up from 89,000 in July, but below the consensus forecast of 161,000. The U.S. employment situation cleared the Federal Reserve to cut rates.
5. September 11th and 12th
The all-items Consumer Price Index had increased 2.5 percent on a year-over-year basis. The increase was the smallest since February 2021, three and one-half years ago. In August, the prices for shelter (+0.5 percent), food away from home (+0.3 percent) increased, while the index for energy (-0.8) fell during.
The Producer Price Index (PPI) was released one day after the CPI. Wholesale prices rose 0.2 percent in August, and 1.7 percent on a year-over-year basis.
6. September 18th
Following the Bank of Canada’s lead over the summer and on September 4th, the U.S. Federal Reserve slashed the federal funds rate by ½ percent to a range of 4¾ to 5 percent. It was the first rate cut since March 2020.
The larger-than-usual rate cut suggests that the Fed has started its attempt to ensure a soft landing by avoiding a recession, and more rate reductions can be expected.
As stated at the Fed’s press conference, it appears that rates may be reduced again before the end of 2024, and another 1 percent in 2025 based on the Fed’s Summary of Economic Projections. The long-term expectation is that the policy rate will settle at 2¾ to 3 percent.
7. September 25th
Oil prices dropped as Saudi Arabia abandoned its $100 per barrel target. The Saudis will maintain production levels and seek to regain market share with lower prices, which is good news for consumers and companies relying on petroleum prices. A reduction in oil prices will also lower inflation globally, which should position central banks for more rate reductions.
8. September 27th
Before North American markets opened, the U.S. Bureau of Economic Analysis released the latest inflation data. The PCE price index rose 0.1 percent in August, and 2.2 percent on a year-over-year basis, down from 2.5 percent in July. It is the lowest annualized inflation rate since February 2021. The PCE is the Federal Reserve’s preferred inflation measure and suggests that the Fed will focus on its other mandate to maximize employment.
9. September 30th
The month ended with the National Day for Truth and Reconciliation.
What’s ahead for October and beyond?
The likelihood of an early federal election triggered by a non-confidence vote has risen dramatically. Once the NDP left their alliance with the governing Liberals, the Conservatives, Bloc and NDP have begun campaigning at Parliament’s Question Period. The political uncertainty could lead to additional market volatility for Canadian securities.
The scheduled U.S. elections may provide increased volatility for American equities.
