2024- Third Quarter Review

During the first half of the year, the S&P 500 Index, which is heavily influenced by large technology companies, was up 14.5%, while the S&P 500 Equal Weight Index, where each company is allocated a fixed weight, was up 3.3%. That reversed during the third quarter, with the S&P 500 Index up 5.25% while the S&P 500 Equal Weight Index increased 9.96%, demonstrating that the robust performance of that period was spread across a broader range of companies.

The third quarter of 2024 finished with the major large cap equity indices at or near all-time highs. For the year, the Standard and Poor’s 500 is up 21.5% and the Nasdaq composite is up 23.18%. “How can this be?” one might ask. There seems to be so much turmoil around the globe and here at home, while the nightly news serves up a never-ending supply of negative news.

With this as a backdrop, why did the stock market perform so well in the first three quarters of the year? The Federal Reserve board lowered the Federal Funds rate by half of a percent and that was the first time that the Fed lowered interest rates since March of 2022. The stock market reacted positively to this news, but that just added to the robust performance that we have already witnessed in 2024.

It is worth the reminder that the stock market is made up of companies that manufacture goods and provide services. The economy continues to be healthy, inflation is down, and this results in an environment where companies find customers for what they have to offer. If these companies deliver healthy profits, this will be reflected in the price of their stocks, not always in lock step, but eventually. As always, at Penobscot, we emphasize broadly diversified portfolios of high-quality companies with exposure to the broad economy. We continue to focus on companies with earnings and dividend growth. When your stocks do well and that is reflected in their share price, your portfolios do well.

The portfolios that Penobscot manages are healthy as the quarter closes. If you anticipate a need for funds in the near term, it may be worth having a conversation with your portfolio manager.

As summer winds down and autumn emerges, we wish you all the best and thank you for your continued confidence in Penobscot.

Sources: FactSet