October 4, 2024, Weekly Stock Market Return Recap, by Kip Lytel CFA, Montecito Capital Management. The three primary indices recorded weekly gains, with the Nasdaq leading the way at +1.25%, while the Dow and S&P 500 saw increases of around 0.8% and 0.9%, respectively. A crucial test for the current rally is imminent as corporate earnings reports are set to be released next week, with investors eager to confirm the high valuation multiples through high level earnings growth. The September jobs report has far surpassed expectations, indicating that the U.S. economy added 254,000 jobs, which has led to a decline in the unemployment rate to 4.1%. Wage growth, an essential metric for evaluating inflationary trends, rose to 4% year-over-year, compared to a 3.9% annual increase in August. The strength of the job market considerably reduces the likelihood of a 0.50% interest rate hike this year, and if the economy continues to demonstrate job growth, the prospect of a 0.25% rate cut may also be eliminated. Historically, in the 16 rate-cutting cycles since 1954, equities have significantly outperformed bonds on average, with small-cap stocks yielding slightly higher returns than their large-cap counterparts.
