Yet another good quarter for both the S&P500 and TSX has come to a close. During the third quarter of 2024, the S&P500 total return was 5.89% in U.S. dollars. Adjusting for currency, the S&P500 returned +4.59% in Canadian dollars, as the Canadian dollar appreciated about +0.0084 cents, closing the quarter at US$0.7394. The TSX total return was +10.54% in the third quarter.

The much-anticipated monetary policy easing cycle started earlier this month when the Federal Open Market Committee (FOMC) cut interest rates by 50 basis points (bp) to 4.75%-5.0% as Chairman Powell signaled that he was shifting from being a so called an inflation ‘hawk’ to an employment ‘dove’. That is, he now cares as much about maintaining employment as he does about reducing inflation with high interest rates. To quote the FOMC statement, “the committee has gained greater confidence that inflation is moving sustainably toward 2% (the committee’s objective) and judges the risks to achieving its employment and inflation goals are roughly balanced”. In the latest changes to the FOMC’s Summary of Economic Projections (SEP) released on September 18th, 2024 (Exhibit 1), the unemployment rate for the 2024-2026 period increased to a high of 4.4% while both Headline and Core PCE (the Fed’s preferred inflation measure) moved lower toward its target of 2.0%. Real GDP was essentially held flat from its previous June projection over the next three years at about +2.0% annually.