We have officially entered the final quarter of the year.

As we gear up for the final months of 2024, I'm sharing key updates and commentary on:

• The State of Consumers
• The State of Companies
• The State of Investing

I'm also sharing two reasons investors should remain optimistic.

Let's dive in! 👇

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The State of Consumers

1. Consumer Debt is Growing (But That's Only Half the Story)

The media loves to talk about the growing consumer debt burden, with credit card debt topping $1 trillion and overall debt increasing by an alarming $4 trillion since the start of 2020.

Of course, that sounds concerning until you hear about the other side of consumer balance sheets.

During the same time in which debts increased by $4 trillion, consumer assets have increased by $27 trillion!

And it's not just the rich getting richer.

The bottom 50% of Americans have experienced the highest net worth growth since 2020.

2. Money Market Assets (Cash) Are At All-Time Highs

Since the Fed started raising rates, cash sitting in money market funds has exploded—up by about 30% (or $1.5T) to more than $6.5 trillion today.

This abundance of cash should serve as a nice buffer for unexpected events in the years ahead.

3. Homeowner Share of Equity Is At Its Highest Level Since the 1950s

At current, the total value of owner-occupied real estate is approximately $48 trillion.

With existing mortgages totaling $13 trillion—and 40% of homes owned outright—homeowners have a combined 72% equity in their homes...

...the highest level since 1958!

Of course, the only focal point of the media regarding real estate is how unaffordable home buying has become.

While there’s no denying that it’s a tough market for new homebuyers, it’d be hard to look at $35 trillion in homeowner equity as anything but a good thing for consumers at large.

4. Wages Have Finally Caught Up With Inflation

Following the highest inflation in decades, wages have been playing catch-up just for consumers to break even.

Well, wages have finally caught up after 16 consecutive months of real (above inflation) wage growth.

These increases have been so substantial that real wage growth since 2020 is now positive.

Not by much, but it’s nice to see that we’re back in the black again.

The State of the Companies

1. Earnings and Profit Margins Are Driving the Market

Even as companies have significantly increased employee wages (see #5), the cost efficiencies gained through the 2022 bear market are fueling higher profitability and earnings.

At present, profit margins are as high, or higher, than almost any time this century, pre-pandemic.

​Earnings have been climbing rapidly as well.

So, if you’ve been wondering why the market has performed as it has, look no further than profit margins and earnings.

2. Gross Domestic Product (GDP) Is Exceeding All Expectations

While the media talks incessantly about a looming recession, GDP came in at 3.0% for Q2 of this year.

The Atlanta Fed’s GDP estimate for Q3 is 3.1%.

For perspective, GDP growth for the last 10 years averaged less than 2% per year, so today’s economy seems to be humming along.

The State of Investing

1. The First Rate Cut Is In the Books (and the Fed Went Big!)

The biggest news of this quarter was the Fed’s decision to trim rates by 0.50% during their September meeting.

The decision to “go big” was said to be based on inflation moving sustainably toward their 2% benchmark and a weakening labor market.

We’ll have to wait to see how aggressive they are regarding future rate cuts.

2. Fear Was Here One Minute and Gone the Next

August seems like a distant memory, but it was only 60 days ago when fear was running rampant through the markets.

In case you’ve forgotten, following a market decline of just 9%, investor fear jumped to levels seen just three other times since the 1980s.

Let me repeat: investor fear hit a landmark peak during a market decline of just 9%.

Given the rebound in the market since, investor discipline was clearly rewarded in short order.

3. New High After New High

The first nine months of 2024 have resulted in the market’s best start since 1997 (up more than 20% so far).

With that performance, we’ve had 43 new all-time highs this year alone.

As surprising as that may be, this is how bull markets work.

Since 1950, there have been more than 1,250 new all-time highs (an average of about 16 per year), so they’re more common than investors may think.

2 Reasons for Optimism

1. Global Living Standards Continue to Rise

To quote First Trust:

"When we zoom out and take a long-term view, it’s clear that global living standards have improved dramatically over the past several decades.

While no metric can capture this perfectly, three key indicators — life expectancy, poverty rates, and literacy — show that, overall, we are living in a healthier, wealthier, and more educated world than ever before.

These trends tell a powerful story of human progress.

While challenges remain, the data clearly show that, over the long run, the world has become a better place for billions of people.”

Given the historical trend, it stands to reason that the global standard of living will continue to improve over the decades to come.

2. Nearly 70% of Our Global Population Now Has Internet Access

One reason many strongly believe the standard of living will continue to improve is because of access to the internet, which we might think of as access to humanity’s collective knowledge base.

It is remarkable that internet access expanded from 40% of the global population in 2015 to almost 70% through 2023, but we still have more than two billion people to go.

Imagine the progress we’ll make toward solving global problems as the entire world comes online.

The potential is surely too incredible to fathom.

Bottom Line

Regardless of my general optimism, nothing can tell us what will happen next in the market.

This isn't so much an admission of my personal inability as it is an enduring truth.

Nobody knows.

While that's true, what we do know is that history has repeatedly shown that humanity has a knack for solving huge problems that appear overwhelming, if not impossible.

And as good as solving problems is for humanity in general, this innate human desire for more and better is what will ultimately drive the markets over the decades ahead, just as it always has.

Not surprisingly, this is where I believe we should place our focus rather than the "breaking news" of the day.

I hope you've found this review encouraging as we head into the final chapter of the year.

As always, please reach out with any questions or concerns you may have.

Stay wealthy,

Taylor Schulte, CFP®