Equity markets have increased substantially in 2024, with large-cap stocks continuing to perform well during the third quarter. Although mega-caps continue to perform well, we saw a general broadening of strength across the market, with smaller-cap and value stocks having a very strong period.
Tax policy talk on the campaign trail
Both presidential candidates have outlined a number of tax changes they’d like to make. Former President Donald Trump’s platform generally calls for lower taxes and higher tariffs. He suggests he would make the expiring individual and estate tax cuts from the Tax Cuts and Jobs Act (TCJA) permanent; discontinue the state and local tax (SALT) deduction cap; eliminate taxes on Social Security benefits and tipped and overtime wages; lower the corporate tax rate from 21% to 20% for all companies, and to 15% for companies that make products in the US and impose a universal tariff of 10% to 20%, as well as a 60% tariff on imports from China.
Vice President Kamala Harris has called for a mix of lower taxes for some Americans and small businesses, and an increase for higher earners, as well as corporations. She would seek to extend the TCJA tax rates for those earning less than $400K; eliminate taxes on tips; increase the child tax credit for up to $6K; give $25K in downpayment assistance for first-time home buyers; increase the Medicare tax from 3.8% to 5% for people earning more than $400K; tax unrealized gains on those with net worth exceeding $100M; raise the long-term capital gains tax rate on those earning over $1M from 20% to 28%; raise the corporate tax rate from 21% to 28%; increase stock repurchase excise tax from 1% to 4%; and expand the small-business start-up deduction from $5K to $50K. Each candidate’s ability to implement these changes will be highly dependent on control across the House and Senate, as well. A split situation will likely lead to less-extreme changes.
Positive performance broadened across sectors
The number of stocks in the S&P 500® posting positive returns increased materially during Q3, with over 76% of the individual names rising in value over the course of the first nine months of 2024. Although there are clearly some very big winners, especially in the technology space, positive performance really broadened out nicely as a variety of individual stocks and sectors moved to new all-time highs. Value outperforming growth was a fairly significant shift when compared to the first six months of 2024. Also, small-caps rose dramatically during the quarter, with the S&P 600® increasing by approximately 10.1%.
Winners, losers, and total return for the S&P 500® by calendar year (9/30/24)
