Q3 in Review and Q4 2024 Market Outlook

For a while this summer, it looked like the bull market in stocks was in trouble. But by the end of the third quarter, stocks were back to posting new record highs.

Bonds also chalked up solid performances in the quarter, thanks to ebbing inflation and the Federal Reserve at long last cutting interest rates (and doing so in dramatic fashion).

While the broad stock market goes into the final months of 2024 having resumed its rally, under the surface, the returns look fairly different, thanks to a rotation out of the big tech names that had led much of this bull market. Instead, corners that had lagged—small company stocks, value stocks—are performing well.

As the fourth quarter gets underway, what’s the outlook for the stock and bond markets? What sectors are most attractive? What should investors do from here? We’ve gathered insights and perspectives from analysts and specialists about market performance, individual stocks, sectors, and mutual funds.

Q3 2024 Market Performance and the Economy

Investors went into the third quarter waiting for the all-clear sign on inflation, which would let the Fed finally cut interest rates. The economic data quickly turned in that direction, with soft readings on employment and inflation data suggesting price pressures were at last meaningfully abating. While a jump in the unemployment rate sparked some fears of a recession, the broader trend indicates an economy moderating with healthy growth.

When the Fed did cut rates, it was by an aggressive half of a percentage point, and officials are now signaling that their concern is about supporting economic growth rather than stamping out inflation.

In the markets, stocks rebounded from an August swoon, but leadership shifted from big tech and growth stocks to value names and smaller stocks.

Here’s our look at the big market and economic trends in the third quarter of 2024, along with Morningstar’s outlook for the fourth quarter and beyond.

Q3 2024 Stock Performance and Sector Outlooks

Which stocks were the best performers in the third quarter? Which ones lagged? Which sectors and stocks should long-term investors be looking at now?

Here we take a deeper dive into the performance of sectors and individual stocks, along with the outlook for the fourth quarter and top stock picks from Morningstar analysts.

Q3 2024 Mutual Fund Performance and Top Picks

In the third quarter, mutual fund investors saw performance trends that have recently dominated portfolios reverse. Among stock funds, value and small-cap names led returns, while growth funds lagged. Meanwhile, high-yield and other credit-sensitive funds were outpaced by funds that could better ride the decline in bond yields.

Here’s Morningstar’s take on how funds and ETFs performed in the third quarter.