Retirement Plan Update, Q3 2024

Market Recap:

The third quarter provided mixed economic signals but consistent improvement in the battle against inflation.  Unemployment started to rise, driving the Fed to pivot from their price stability mandate in favor of their maximum employment mandate.  In doing so, we got the first interest rate cut for this cycle, which reduced the Federal Funds rate by 0.5%.  The uptick in unemployment triggered an indicator known as the Sahm rule, which has consistently predicted recessions.  However, the unemployment rate has not continued to push higher, leading many to wonder if this is yet another area where things are different in this economic cycle.  Overall, consumer and government spending has been resilient, and it’s unlikely that the economy will slow down into recession unless that changes.  In markets, bonds joined many stock indices to deliver solid gains last quarter. 

Elections and your Retirement Plan

Markets can be volatile in election years, and participants may be uncertain about how a potential change in political leadership could affect their retirement plans going forward.  Many topics have been debated throughout this campaign season, which may result in a degree of market volatility, particularly as we get closer to November 5. Markets hate uncertainty, and this election is likely to produce a lot of it. But there is one important point to keep in mind: Over the long term, going as far back as the 1930s, U.S. stocks have nearly always been higher at the end of a president’s term in office than they were at the beginning, regardless of party affiliation.

The reality is that employing a nonpartisan buy-and-hold strategy would have generated substantially higher returns than investing only when a Republican or Democrat was in the Oval  Office. As illustrated here, the true answer and winning strategy for many participants isn’t political party investing, but rather staying invested over the long term.