It is fair to say that capital markets experienced a reversal in the third quarter of 2024. What had led in the prior two years lagged, and what had lagged, led. This was welcome news to those that have been patiently waiting for an equity market environment that favored more than the so-called Mag 7. We can see in the chart below that the Russell 2000 Index of small cap stocks outperformed the Mag 7 dominated NASDAQ by almost 800 basis points in the quarter. Moreover, the Equal Weighted S&P 500 Index outperformed the Cap Weighted S&P 500 Index by nearly 4.5%. All of this points to broadening equity markets in the quarter. We suspect this will continue as earnings growth participation spreads from the Mag 7 to the rest of the broader economy. The coming earnings reporting season will shed light on whether this thesis proves out, as we suspect it will. As such, this is a very interesting upcoming earnings announcement season that we will be closely monitoring.

Also of interest is the strong returns to bonds in the quarter. After a very challenging couple of years, bonds broke out in anticipation of the Fed’s newly initiated rate cutting program. Whether this will continue is yet to be seen, but we suspect we will have favorable bond market returns of the coming few quarters. WealthPlan initiated some changes to our bond exposures in advance of the Fed rate cut, adding to the weight of our core bond holdings, which extended duration and increased credit exposure. We think these moves position us well for continued strong bond strategy performance as rates come down further.

We also note it was a strong quarter for the so-called Dividend Aristocrats stocks. After a period of dormancy, Dividend Aristocrat stocks broke out in the quarter, which benefited WealthPlan’s Dividend Aristocrats strategy. We expect this type of favorable environment will persist for dividend growth stocks as the Fed’s rate cutting program continues.

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DISCLOSURES

The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The S&P 500 index is regarded as one of the best gauges of prominent American equities’ performance, and by extension, that of the stock market overall.

The NASDAQ Composite is a stock market index of common stocks and similar securities listed on the NASDAQ stock market. The composition of the NASDAQ Composite is heavily weighted towards information technology companies.

The Russell 2000 tracks the roughly 2000 securities that are considered to be US small cap companies. The Russell 2000 serves as an important benchmark when investors want to track their small cap performances versus other sized companies. The Russell 2000 tends to have a larger standard deviation in comparison to the S&P 500.

The S&P 500 Dividend Aristocrats is a stock market index composed of the companies in the S&P 500 index that have increased their dividends in each of the past 25 consecutive years. It was launched in May 2005.

The S&P MidCap 400 Dividend Aristocrats Index is composed of companies in the S&P MidCap 400 that have increased dividends for fifteen consecutive years.

The Bloomberg US Aggregate Bond Index is used as a benchmark for investment grade bonds within the United States. This index is important as a benchmark for someone wanting to track their fixed income asset allocation.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Investment(s) may be appropriate for you, consult your financial advisor prior to investing. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

No investment strategy can assure success or completely protect against loss, given the volatility of all securities markets. Statements of forecast and trends are for informational purposes and are not guaranteed to occur in the future. All performance referenced is historical and is no guarantee of future results. Securities investing involves risk, including loss of principal. An investor cannot invest directly in an index.

The information in this communication applies solely to the intended audience and in no way amends, revokes, or otherwise alters the existing agreements and relationships between WPIM and its clients.  This communication is not a binding offer, expressed or implied.  WPIM undertakes no obligation to update or revise the information herein or in any referenced third-party resource due to new information, future events or circumstances, or otherwise.

WealthPlan Investment Management (“WPIM”) uses data compiled and/or prepared by third parties (“Third Party Data”) in the delivery of Licensed Research and Data. Third Party Data is not owned by WPIM and user may be required to obtain permission directly from third parties for further use of Third-Party Data and may be required to pay a fee depending on the use contemplated by the user.