Financial markets experienced elevated volatility in the third quarter, but as the final three months of 2024 get underway, stocks are at record highs and bonds are also producing solid returns. U.S. stocks, as measured by the S&P 500, rose throughout July, before experiencing an almost 10% decline in August due primarily to renewed recession fears. The sell-off did not last as the S&P 500 rallied to new highs and finished the quarter up 5.5% (and over 20% for the year, both excluding dividends). For the first time in a while, large U.S. stocks are not leading the way, as the Russell 2000 (index of smaller U.S. companies) was up almost 9% in the quarter and international stocks, as measured by the MSCA ACWI Ex USA index, were up over 7%. Moreover, the U.S. technology sector, which has been leading the market higher for several years, was among the worst sectors in the quarter, while utilities and real estate stocks were among the best. So, as was the case in late 2023 and into the first quarter of 2024, market breadth is improving again. As we have discussed in prior letters, we believe that is a positive development, however, it remains to be seen if that improving breadth will prove sustainable….
