SAA Monthly Investment Update: October 2024

Global equities declined during October 2024, although Japan was a notable outperformer. Fixed income markets also retreated (i.e. yields rose) for the month as a Republican victory (now confirmed) could mean the likely implementation of more inflationary policies.

Treasury Yields Climb Sharply on Resilient Data and Reduced Expectations of Fed Easing: Yields climbed notably across the Treasury curve in October, ending a 5-month trend of lower yields. Yields rose in October despite the Fed’s 50 bps rate cut in September as stronger economic data and election-induced policy uncertainty boosted market volatility. September’s payroll report of 254k new jobs handily exceeded the 150k consensus and the unemployment rate fell 0.1% to 4.1%. Key inflation measures also proved sticky; Expectations of future Fed rate cuts also fell. By month end the market was pricing 25 bps less in rate cuts for 2024 and another 50 bps less in 2025 compared to the start of October. Complicating the outlook for investors is the impact of hurricanes Helene and Milton in upcoming data, both in terms of reduced economic activity in the aftermath, but also boosts from subsequent rebuilding. The pending outcome of what appears to be another very tight presidential election is also weighed on the market.