Q4 2024 Look Ahead- The Deep Breath Before the Pivot
As we turn the corner into Q4, the economic data paints a story of contrasts and transitions—a “two-speed economy” where consumers continue to spend, yet job growth is faltering. It’s a balancing act that will define the year-end and set the stage for 2026.
Take a look at the wage growth vs. job growth chart. Wages remain elevated, fueling spending power, yet the jobs chart shows growth essentially flatlining—and even turning negative after revisions. The message is clear: holiday consumption could make or break Q4 GDP.
Inflation Cools, Cuts Loom
The Fed rate path chart shows policymakers planning two more cuts in Q4, targeting 3.75%. Inflation is sticky thanks to housing, but the broader trend is cooling. This is where policy meets markets—will lower rates reignite momentum?
What’s Next for Fixed Income
Our historical bond market chart shows why fixed income is back on the radar. In past cycles, much of the return came in the first eight months after cuts begin. With over half of U.S. debt set to refinance soon, fixed income is no longer an afterthought.
Earnings Momentum Meets Reality Check
The earnings vs. valuations chart tells a story of strength with caution. S&P 500 earnings are growing at 13% year-over-year, but valuations sit 21% above their 10-year average. Add in record buybacks and you’ve got a market where optimism meets reality.
This coming quarter isn’t about extremes—it’s about transition. Wages, Fed cuts, fixed income positioning, and earnings strength provide optimism. But valuations, debt, and jobs remind us that we’re walking a fine line.
Q4 2025 feels like the deep breath before the economy pivots into its next phase.
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Tim Phillips, CEO, Phillips & Company
Sources:
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