Hello,  

This is David Kelly. 

I’m Chief Strategist here at J.P. Morgan Asset Management and I head the team that produces the Guide to the Markets.  Welcome to the Economic and Market Update for the third quarter of 2024. 

Despite some weakness at the headline level, underlying U.S. economic momentum remained solid in the first half of the year. At the same time, progress on inflation has been very slow, while the labor market has continued its gradual normalization. Moving forward, a resilient consumer should allow the U.S. economy to sustain a soft landing into next year. However, with still elevated geopolitical tensions and an upcoming U.S. election, risks remain that are worth monitoring.

Meanwhile, sticky inflation has forced the Federal Reserve to reassert its hawkish tone. At its June meeting, the Fed’s updated dot plot showed that it expects to deliver just one rate cut this year, down from the three cuts they projected in March. That being said, while they have delayed rate cuts, the Fed has begun to slow the pace of quantitative tightening. Elsewhere, other global central banks have begun to ease policy and a widening gap in short-term interest rates between the U.S. and other major developed economies could maintain the U.S. dollar in an elevated position for some time to come.

Bonds have rebounded after a challenging start to the year, while equities have maintained their upward trajectory and notched multiple new all-time highs during the second quarter. Moving forward, broadening earnings growth should support a more inclusive stock market rally, while investors may want to use this extended period of higher rates to lock in attractive yields in fixed income. Outside of traditional markets, alternatives can help better prepare portfolios for challenges that may lie ahead, whether it be through enhanced income, alpha or diversification

The Guide to the Markets, now in its 20thyear, is built to illustrate economic fundamentals and investment opportunities and risks. However, it is important to do this concisely. There are over 60 pages in the Guide, but that is far too many for any conversation about the markets. 

So, what we do here is boil it down to just 11 slides.  In particular, weassess the recent performance of the markets and economy, considering trends in growth, jobs and inflation in the U.S, and how these trends are shaping the outlook for monetary policy.  This is followed by comments on growth from around the globe.  Finally, we consider the implications of all of this for those investing across asset classes and highlight the importance of getting invested, even with markets near all-time highs, and actively engaging with opportunities in alternative assets.