
The U.S. equity market rallied throughout the quarter, with the S&P 500 posting its best nine months to start a year since 1997. Bonds also appreciated as rates fell across the yield curve due to the much-anticipated September interest rate cut by the Fed. Small and mid-cap stocks led the way in the third quarter, with returns broadening out from the narrow large-cap gains of the first two quarters. Foreign also outperformed, beating the S&P 500 by over 1% for the quarter.

As a reminder, the index returns above should only be used as a very broad point of reference.
Cash & Fixed Income: Cash & Fixed Income: High-yield bonds led for all periods, except 3 years, where cash led the way. Cash was the laggard for the quarter, 1, 10, and 15 years. Municipal bonds were the laggard year-to-date, while aggregate bonds were the worst performer in 3 and 5 years.
Bond yields remain strong, still in the 5% - 7% range. With the recent interest rate cut, money market yields have moved below 5%. We also continue to see strong evidence that bonds will provide meaningful diversification from stocks.
Equities: Large-cap stocks continue to outperform for all periods year-to-date and longer but were the laggard for the quarter, where small-cap led the way. However, small-cap remains the worst performer year-to-date and 3 years. Foreign stocks continue to lag in the 1, 5, 10, and 15-year periods. Overall, equities continued their strong performance.
Earnings growth is something we are closely watching, particularly how the consumer is holding up. The third quarter just marked the 16th consecutive quarter of revenue growth, but going forward is crucial to determine where the market goes from here. As a result, we continue to maintain our tilt toward higher quality in both fixed income and equities. Overall, we continue to be cautiously optimistic as the consumer continues to hold up well and spending remains robust.
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