October Market Commentary

October 2024 saw stock markets decline as momentum from September’s gains faded after the Federal Reserve’s interest rate cut. Early optimism following a strong jobs report and record highs for the Dow (1) and S&P 500 (1) was tempered mid-month by geopolitical instability and fears of further rate cuts being delayed. By month-end, disappointing big tech earnings and rising AI-related costs raised profit concerns. Uncertainty from what was widely projected by pollsters as a likely dead-heat election added to a cautious mood for investors.

Communication services, financials, and energy were the only sectors to outperform, while health care, materials, real estate, and consumer staples lagged. Economic data showed inflation edging up but staying within expectations, with the CPI dipping and PCE at 2.1%, aligning closely with the Fed’s 2% target. GDP grew by 2.8%, spurred by consumer and government spending. Bond yields rose, with 10-year Treasuries hitting a three-month high, while the dollar strengthened, gold surged, and oil prices increased.

Last week’s election results were followed by a strong rally, presumably due to the lifting of election uncertainty, the outlook for extending the Tax Cuts and Jobs Act (TCJA), and the prospect of business-friendly deregulation. Though the new administration may have control of the White House and Congress, it will likely be constrained by the run-up of debt and deficit spending and legislative procedures relating to reconciliation. 

The U.S.’s national debt, now at $35.27 trillion (about 122.3% of GDP), and a projected budget deficit of over $1.9 trillion (6% of GDP) will likely impede the new administration’s ability to reduce taxes or significantly boost spending. These high debt levels increase borrowing costs and restrict fiscal flexibility, as investor concerns could drive up Treasury yields, thus raising government debt-servicing costs and impacting the private sector through higher interest rates. If bond markets view U.S. debt as unsustainable, yields could surge further, with potential credit rating downgrades akin to those in 2011, which could damage confidence in U.S. creditworthiness.

These are complex issues, and to discuss the road ahead, we have scheduled Barry Knapp of Ironsides Macroeconomics to share his commentary and outlook on the issues that will shape the economic markets and the Trump administration’s policy agenda. Barry is a frequent guest commentator on CNBC and other financial media outlets whom we have followed for years, and we value his informed, fact-based perspective from 40-plus years as a macroeconomist and market strategist.

Mark your calendar! 

Barry Knapp of Ironsides Macroeconomics

Tuesday, Dec. 3rd at 4 PM: Barry Knapp: via Zoom. Barry is a frequent guest commentator on CNBC and other financial media outlets. We have followed him for years and value his informed, fact-based perspective from 40-plus years as a macroeconomist and market strategist.

Register here

Moana 2

Saturday, Nov. 30^th at 2:30 PM we are sponsoring a private showing of Moana 2 in support of one of our favorite local charities, Summer Santa. If you have children or grandchildren you want to bring to the show, let us know and be our guest. Tickets will go fast, so let us know ASAP!

WWA Holiday Reception

Sunday, Dec. 15^th at 5 PM We are hosting our Holiday Cocktail Gathering at Hotel Vin in the heart of Grapevine, TX. This will be a joyous time to gather, enjoy heavy hors d’oeuvres and premium libations, and experience the magnificent holiday magic of the “Christmas Capitol of Texas.” Be on the lookout for an evite in your email to RSVP. We hope you will make it!

Kestra Financial Mailing Regarding Consent Assignment of Investment Advisory Agreement

This week, you will receive a letter from Kestra Financial (the firm we affiliate with to run our wealth management firm and serve you as a client) regarding your investment advisory agreement. The letter details a change in the ownership structure of Kestra’s parent company. The mailing is a regulatory requirement, and Kestra’s ownership change will not affect the services we provide you or result in any changes in your account. No action is required on your part unless you do not want to consent to the assignment of your agreement,

If you have any questions or concerns about this mailing, please don’t hesitate to reach out.

Year-end Tax Planning

We advocate focusing on what we can control. Specifically, we remain committed to investment strategies that are first informed by our client’s financial plans and unique investment profiles, as well as well-diversified, cost-effective, and tax-conscious portfolios. As the year winds to a close, now is the time to look toward year-end tax planning. We are here to assist you, and the checklist below is provided to prompt you about specific topics you may want to address before the end of the year.

Year-end Tax Planning Checklist:

• Make Contributions to Retirement Accounts
• Make Charitable Contributions
• Review whether a Roth Conversion Makes Sense for You
• Does it Make Sense to “Stack” Deductible Items in Alternating Tax Years?
• Make Annual Gifts to Family Members
• Check Paycheck Tax Withholding Rates
• Evaluate Capital Gains and Losses; Realized and Unrealized
• Review your Estate Plan

Your October portfolio reports have been deposited in your eMoney vault.

We conduct year-end reviews and can discuss year-end tax planning opportunities that align with your goals and objectives. You can call us or schedule a review here.

As we approach Thanksgiving, we’re reminded of the importance of relationships, both personal and professional. From all of us at Waterworth Wealth Advisors, we wish you and your family a joyous and restful holiday filled with warmth, gratitude, and cherished moments. Thank you for the trust you place in us and for allowing us to be part of your journey—Happy Thanksgiving!