3rd Quarter Market Recap: Riding the Volatility Wave - Why Millennial and Gen Z Investors Shouldn't Panic
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Feeling lost in stock market madness? Don't sweat it – I've got your back.
In this episode, we're diving Q3 2024's financial rollercoaster.
I'm breaking down the Fed's money moves, how the election could affect your portfolio, and how a large-scale war in the Middle East could swing financial markets.
Here's the kicker: I'll show you why all this volatility isn't as terrifying as it seems.
Whether you're a crypto connoisseur or still figuring out what stocks actually are, this episode's packed with need-to-know info.
Are you ready to level up your financial game? Then get reading!
🗓️ Schedule a FREE call to talk about whatever money questions are on your mind.
Transcript:
Hey, I'm Katherine and welcome to a quarterly market recap with Heir Necessities.
At the end of every quarter, I give you an easy to digest, easy to understand, jargon-free recap of what happened in the stock market last quarter and what we might expect moving forward.
To start off, in the third quarter of 2024, the top line story was all about volatility.
This is a little bit unique in terms of what we've seen over the past few years. But in terms of how the stock market usually functions, it's not unique at all. So it can feel like something new if you're a newer investor, you don't pay that much attention to the stock market.
If you're a seasoned investor, you've been around a long time, you know this is actually a reversion to what is more normal in the stock market, having increased volatility. Even though there was increased volatility, the stock market did still pretty well in the third quarter. The S&P 500, which is used as sort of a broad market overview index, was up just under 6%.
Long-Term Investing Strategies: Navigating Market Volatility
We weren't talking about huge amounts of volatility with negative downswings. What we actually saw instead was some shorter-term volatility, but then some really quick upswings, which leads to a really, really important point. One of the most important points when we're talking about volatility is the need to stay invested.
If you're a newer investor, if you're a current or future inheritor, or just someone who's starting to tune in after having money invested for a long time, it can feel like everyone is doing fancy things. People are talking about options, you're hearing about the GameStop frenzy, individual stocks, all of that. It feels exciting and scary and also super overwhelming.
But the best way to build wealth over the long term is to be a buy and hold investor. And all of those strategies are great if they're fun for you, if you want them to be a hobby, okay. But they're not a great way for most people to make money over the long term.
This last quarter was a perfect example of why. Because when markets are volatile, when you're buying and selling and you're making these bets, you don't know which way markets are going to swing from one day to another. But how they swing from one day to another can have a huge impact on what your portfolio does.
Understanding Market Trends: The Importance of Long-Term Perspective
When you're a long-term buy and hold investor, markets swing up, markets swing down, markets go sideways, it doesn't matter to you. All that matters is that markets continue to follow the long-term trend, what we've seen throughout the past 100 plus years of history of moving up over time. And over time, I'm not talking about days or weeks or months or even years.
I'm talking about decades, which is why it's so important to be a long-term investor, especially in periods like we're in right now where there is a really high amount of volatility. We're in a really high volatility period now because the Fed is cutting rates, because we have a presidential election coming up now in less than 30 days, and because we have a lot of global uncertainty.
Key Factors Driving Market Volatility in 2024
Each of these factors on their own can contribute to volatility in the stock market, but when we have all three of them together, that's where you start to see a real increase in volatility. Let's break down a little bit how each of those factors are contributing. In terms of the Fed cutting rates, what you see is that everyone knows the Fed is now on this path of lowering interest rates.
If you looked at interest rates for anything, thought about buying a house, refinancing, whatever, you know that interest rates are coming down. But it's still a question of when they're gonna cut rates next and how much they're gonna cut rates by. And what investors, institutional larger investors are doing is that they have priced in certain expectations already about what the Fed is gonna do.
So if the Fed doesn't meet those expectations, then what's going to happen is those analysts, those investors, they're going to change their outlook. And so that leads to the short-term volatility where you have this really rapid adjustment period, basically, where all the sort of analysts, like larger institutional investors, have basically made a bet on a stock price, assuming that the Fed is going to do X, and then the Fed does Y.
Impact of Presidential Elections on Stock Market Volatility
So they need to adjust their bet up or down really quickly, which leads to some of the short-term volatility we're seeing. In terms of the presidential election, in the past, presidential elections haven't led to significant changes in the stock market over the long term, but they have caused short-term volatility, again, based on who wins or loses against market assumptions.
Always remember that markets are a forward-looking vehicle. And so the price of the stock market now is not reflective of what people think all of the companies trading in the stock market today are actually worth under today's economic conditions. It's a measure of what people think the companies trading at the stock market now are worth in the next three, six, 12 months looking forward.
So when assumptions change, like if the markets have priced in that Trump's gonna win and then Kamala pulls it off, then there could be a rapid shift in the stock market price. So there could be some short-term volatility depending on who wins the election. And also remember that volatility doesn't necessarily mean market downturns.
Global Uncertainty and Its Effect on Market Stability
When I say short-term volatility, it could be short-term market upswings or short-term market downturns. The last factor is global uncertainty. We're seeing the possibility of a larger scale war in the Middle East, and that would certainly impact the stock market in the short-term and potentially also in the long-term in terms of what economic and geopolitical concerns that kind of conflict would create.
For anyone who's watching this and wants to know what I think is going to happen, the answer is I have no idea. We are in a period, especially over the next couple of months with the election, there's a lot of uncertainty. There's a lot of political uncertainty in the US and abroad.
It's concerning to me. I know it's concerning to a lot of my friends, my peers, my clients. The best thing that I can say from a financial perspective is, again, stay invested.
Managing Investment Risk During Volatile Market Periods
Volatility can be really scary. It can be hard to deal with. But volatility, again, is normal.
There have been market corrections of 10% or more, so market drops of 10% or more, in 20 of the last 35 years. But in those same years, you also had a similar number of years with amazing performance, with performance that outperforms that 10% market drop. And if you sold out at the bottom, you're likely to miss those days or those months or periods of really high performance, which will have a negative impact on your portfolio.
If you're stressing out about how your money is invested, my tips for you are to make sure that it's in line with your risk tolerance. And if you're sure that it is, then just stop watching it. Don't look at it during periods when the markets are volatile.
If you have any questions about investing, the stock market, what did happen, what I think might happen, you can always reach out to me at my website, SunnyBranchWealth.com.
You can hit me up on email, Instagram, TikTok. I'll link all of that in the show notes below so you know where you can reach me and where to find more information if you want to learn more about my work with clients at Sunny Branch.
Let’s take the next step together
Understanding how to manage your investments in response to market changes is not easy. Inheritors can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, you can reach out to Katherine Fox, CFP® and CAP®, a financial planner for inheritors to learn how Sunnybranch can help you understand your portfolio and make a plan for the future, whatever the stock market does.
