
US stocks are off to their best start to a year since 1997. US equities are on a five-month winning streak, in part to a broadening of the market and the Fed cutting interest rates for the first time since 2020. In looking forward, the market is entering a seasonally strong period but will have to contend with volatility around the US Election.
Despite the many issues on the ballot this November, we believe some of the most important issues for markets revolve around 1) Taxes, 2) Trade and 3) Deficits.
Not only did the Fed cut rates in September for the first time since 2020, but they cut by 50 basis points. The jumbo cut was a signal on the Fed’s intent to not “fall behind the curve.” The September Fed meeting also provided an updated “Dot Plot,” which showed a majority of FOMC members expect an additional 50 basis points of cuts in 2024. With two Fed meetings left in November and December, current market odds agree with the Fed.
September-November is historically the weakest 3-month stretch for equities in a Presidential Election Year. While the S&P 500 rallied 2.1% in September, a big contributor was the Fed’s jumbo rate cut (50 bps). The Fed’s next meeting is not until after the election and equity valuations are elevated. We also could see added volatility if we do not have a declared winner for days or weeks. On a positive note, US equities historically rally after the Presidential Election into year-end.
This is just the 10th time since 1970 the S&P 500 had 10+% returns in the first quarter to start a year. In the previous nine occurrences, the S&P 500 had a median return in the third quarter of 1.9%. The S&P 500 was able to surpass this, finishing the third quarter up 5.9%. In looking at the fourth quarter and full year returns in these years, the S&P 500 had median returns of roughly 8% and 28%, respectively. In fact, none of these years produced a single negative calendar year return.
We believe there is a disconnect between the bond & equity markets. Equities remain near all-time highs but the bond market is pricing roughly 200 basis points of cuts over the next year (according to the 2-year Treasury yield). We believe bond market pricing is overdone and yields have dropped too far in anticipation of a quicker cutting cycle. The economy remains resilient but inflation may be sticky. As highlighted in our last quarterly outlook, we prefer short-to-intermediate bonds in the fourth quarter.
In late-September, Chinese equities posted their best week since 2008 after the government announced a massive stimulus package (highlighted to the right). As a reminder, China has been stuck in a lengthy downturn due to a property crisis, deflation and weak consumer confidence. In our view, the magnitude of this stimulus is reminiscent of US stimulus provided in March 2020 by the Fed and US government. Ultimately the size of this stimulus and commitment “to do more” may help finally stabilize the Chinese market.
In the early days of Airbnb, co-founder Brian Chesky went to surprising lengths to gather customer feedback. He would stay with Airbnb hosts to experience the platform as they did, asking detailed questions about their needs and frustrations. Chesky’s commitment to listening wasn’t just about making improvements—it was about truly understanding the customer experience in a way few founders do.
Sara Blakely, the founder of Spanx, took a similar approach. In the early days of her business, Blakely would personally visit department stores to watch customers try on her shapewear and listen to their feedback. She also spoke directly with store employees to learn what worked and what didn’t.
As Spanx grew, Blakely continued reading customer emails and social media comments to stay connected to their needs. When women began asking for more than just shapewear—like leggings and bras—Blakely expanded her product line in response, fueling Spanx’s growth. Her hands-on approach to capturing feedback helped Spanx evolve into a billion-dollar brand.
It’s not just giant companies like Airbnb and Spanx that benefit from this kind of founder obsession with customer feedback. Small business owners can unlock tremendous value by taking the same approach.
William Brown’s story shows how the Listening & Leveling approach can directly increase business value. Brown began with a simple $50 Word document designed to teach beginners how to trade online. What set him apart was his commitment to listening to customer feedback and using it to continually improve.
When customers asked, “What broker do you use?” or “How do I navigate the market?”, Brown didn’t just answer—he adapted his product to better meet their needs. Over time, his offering evolved into a full-fledged educational program with videos, coaching, and additional resources. This not only enhanced the product but transformed Brown’s business, WB Trading, into a far more valuable asset.
By responding to feedback, Brown’s product improved and so did its perceived value. This allowed him to raise prices from $50 to $2,000, significantly boosting profitability. His focus on continuous improvement also deepened customer loyalty, reducing churn and driving long-term value in his business.
Through these strategies, William didn’t just build a better product—he built a more valuable business, leading to a seven-figure exit.
How can you apply the Listening & Leveling approach to grow your business?
No matter how big your business becomes, you’re never too big to listen to your customers. Whether you’re building a billion-dollar empire like Sara Blakely or fine-tuning a niche product like William Brown, customer feedback is the key to staying relevant, evolving your offering, and maximizing your company’s value.