What drove markets higher in Q3?

The S&P 500 gained almost eight percent during the quarter and reached new all-time highs, with the Nasdaq and Dow also posting strong gains. International stocks have also performed well with developed markets rising more than four percent and emerging markets climbing over ten percent.

So, what is contributing to this exuberance in the market? Here are some key factors that underlie this performance:

Strong corporate earnings were a major driver, with eighty percent of S&P 500 companies that reported second quarter results exceeding earnings expectations. GDP growth remains healthy, with second quarter figures revised upward.

Continued enthusiasm for artificial intelligence helped support technology stocks and broader market sentiment throughout the quarter. The Magnificent 7 continued its strong performance, driving sectors such as Information Technology, Communication Services, and Consumer Discretionary higher.

The Federal Reserve cut interest rates by 0.25% in September to a range of 4% to 4.25%, providing some monetary policy support even as the labor market showed signs of weakening.

Given the above factors, markets have reached new highs despite various economic crosscurrents during the quarter.

As investors, it helps to stay cognizant of the fact that short-term factors like earnings reports and Fed decisions can drive quarterly performance, successful investing is about staying focused on long-term trends and maintaining a disciplined approach through different market environments.