Taking Stock: Q4 2024 Equity Market Outlook

Key takeaways

The economy is not the stock market. And that’s good news. Summer market volatility tested investor conviction, but fundamentals prevailed and stocks quickly rebounded. As Q4 begins, we see:

  • Fed and election uncertainty fueling volatility
  • Generally positive stock reaction to rate cuts
  • Greater opportunity in large vs. both mega and small caps

Q3 volatility was at least partly rooted in concerns over a slowing economy and whether the Fed was behind the curve in addressing it. We believe it had little to do with the fundamentals underlying the stock market, and this is an important distinction.

Markets are an anticipatory mechanism and attempt to predict recessions, with historically mixed results. When the economy is in a slowdown, markets can struggle to discern a midcycle slowdown from a recession ― stoking volatility.

While the economy has struggled to recalibrate post-COVID, spiraling into a series of “mini rolling recessions” ― first in technology, then in housing ― we find that the stock market, and the companies that comprise it, have managed to adapt to what we see as a return to more “normal” conditions. This resumption of normalcy also means more volatility, which we believe can be a boon for skilled stock pickers.

1st quote from BlackRock Q4 Equity Market Outlook Article