Stock market volatility increased during the third quarter as investors grew concerned that the economy was slowing too rapidly. Deteriorating economic conditions typically lead to slower corporate earnings growth, which results in lower stock prices. However, investors were pleased that the Federal Reserve Board lowered interest rates in September for the first time in many years by 0.50% to help counter the slowing economic growth. As a result, the S&P 500 Index ended the third quarter up 20.81% year-to-date, while the Dow Jones Industrial Average gained 12.31%. As for the bond market, the Bloomberg Intermediate U.S. Government/Credit Bond Index increased 4.68% year-to-date as of September 30, 2024.

This year, the Fed has been challenged because they must walk a tightrope regarding their monetary policy. On the one hand, the Fed must be careful not to lower interest rates too much or too fast, or else inflation could accelerate again. This is because lower rates make it cheaper for corporations and individuals to borrow, leading to an increase in spending, which can lead to a rise in prices. However, they also need to ensure interest rates are not too high, which could stifle economic growth and lead to higher unemployment, lower corporate earnings, and possibly even a recession. When interest rates are too high for too long, the economy weakens as corporations and individuals typically borrow and spend less. This balancing act will likely be the focus of investors and traders going into next year.

The Federal Reserve Board will likely choose to continue lowering interest rates into the future to support the economy as the inflation rate is expected to continue to decline. Further declines in interest rates would be positive for stocks because they make stocks more attractive than fixed-income investments, which now pay lower yields. Lower interest rates also help support the labor market and the economy in general. However, one disadvantage of the Fed lowering interest rates is that it will reduce the yield investors can earn on fixed-income investments such as bonds, CDs, and money market funds.

Many investors have been concerned lately that the economy is slowing too much, which could ultimately result in a recession. They fear that the reason the Fed has already reduced interest rates by one-half percent is that the economy is already slowing and in danger of falling into recession. We do not believe the economy is in a recession or that there is an immediate threat of entering a deep recession despite a recent slowdown in manufacturing, employment, and other leading economic indicators. In fact, we believe that economic activity will increase again after the Fed lowers interest rates a few more times. As long as the economy remains out of recession and corporate earnings do not deteriorate significantly, the bull market in stocks should continue.

Typically, the fall is not a positive time for the stock market. This is especially true in election years when the election is expected to be contentious and the outcome is very uncertain. Investors and traders do not like uncertainty, and close elections create unpredictability regarding economic policies, potential future tax increases, government spending, etc. However, once an election is over, the financial markets typically breathe a sigh of relief and begin to rally again.

This year, we have generally kept our investment philosophy simple by overweighting large- company U.S. stocks and high-quality bonds while investing very little in small-company stocks, foreign stocks, emerging market stocks, and other volatile asset classes. Investing in more volatile parts of the financial markets has not made much sense when the performance of large-company U.S. stocks has generally been more profitable. However, in the future, we may look to expand into additional asset classes if the Fed continues to lower interest rates and we see good value opportunities.

As always, we will continue to monitor ongoing economic and financial market conditions. In the meantime, please contact us if you have any questions regarding your portfolio or the financial markets in general.

_{* Index returns were obtained from the Wall St. Journal and Bloomberg on October 1, 2024.}

_{Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Nadler Financial Group, Inc.), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Nadler Financial Group, Inc. Please remember to contact Nadler Financial Group, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing /evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Nadler Financial Group, Inc. is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Nadler Financial Group Inc.’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request, or at www.nadlerfinancial.com.}

_{Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational / comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your Nadler Financial Group, Inc. account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Nadler Financial Group, Inc. accounts; and (3) a description of each comparative benchmark/index is available upon request.}