2024 Q3

As we head full steam into Harvesttime, and as I have shared in the past, I usually try and grow something that is not supposed to grow well in our region. Last year was ginger, and this year is turmeric. Turmeric is a tropical rhizome like ginger, and needs a specific environment for it to mature, not unlike the stock market. I will share pictures in my quarterly video update in January, but it appears to be flourishing.

At the close of the third quarter, we also find the markets flourishing with the 3 main indices trading at or near all high time highs. As the Federal Reserve’s multi-year battle with inflation shifts to easing, we experienced the first rate cut since the Fed began raising rates in March of 2022. As we have noted in the past, the economy is still showing signs of resiliency. The Leading Economic Indicators are, quite honestly, difficult to read at this point. We can still look to government and Fed covid-era responses, and their impact on supply chains and excess savings. Indicators that were showing hopeful signs earlier this year have lost steam – basically, in some areas we see signs of growth, and in others we see some struggle.

With the election coming up in a month, many have been asking what impact this will have on markets. Typically, elections and government policy have little short-term impact but can have a larger impact over years particularly when it involves policies around taxation and tariffs.

In summary it appears that we are heading for the unusually illusive economic soft landing. Between the Fed’s interest rate cuts and the diminished possibility for even a mild recession, investors are increasingly optimistic. This helps explain the current market highs.

The economic outlook for the fourth quarter of 2024 appears to be one of steady, albeit slowing, growth. U.S. GDP growth is expected to hover around 2%, which is close to its long-term trend rate. This moderate expansion is supported by resilient consumer spending, though signs of softening demand are present. With expectations of additional interest rate cuts, and the current economic cycle in which we find ourselves, we expect to see demand pick up and the economy begin expanding in mid-2025. Markets will be looking for confirmation of this and are currently at levels which would support the view that we will not have a moderate or deep recession. We do see market headwinds including global economic uncertainty in areas like China and Europe, corporate earnings pressure as they navigate higher input costs and slowing demand, and geopolitical tensions in hotspots such as Ukraine and the Middle East. While this is not uncommon, higher market volatility could return as it did earlier this year.

In the Harvest portfolios, our equity mix continues to perform well in both up and volatile markets. In addition, our fixed income adjustments earlier this year also appear to have been timely as interest rates have now begun to fall. Cash flow within the portfolios continues to remain strong, and this will continue to be welcome by those taking distributions in retirement. If you have any questions, please do not hesitate to contact our office, and as always, we thank you for your trust.

Marc Henn, CFP®

CEO & Founder