Quarterly Market Perspective

Summer (2024, Q2)

We hope this newsletter finds you enjoying the warmth and sunshine of summer 2024. As we move into the second half of the year, we are excited to provide you with an update on the current state of the economy, the market and our outlook for the coming months. The first half of 2024 has been filled with significant developments and we are here to help you navigate through them.

The stock market has continued its impressive performance from late 2023 into the first half of 2024. The S&P 500 Index reached several new all-time highs, driven by a resilient U.S. economy, strong corporate earnings and advancements in technology. The Nasdaq Composite, heavily weighted with tech stocks, has also seen significant gains, highlighting the continued importance of technology in the market.

Despite these gains, it is essential to remember the value of diversification. While tech stocks have performed well, other sectors such as healthcare, finance and consumer goods have also contributed to the market’s overall strength. Diversification helps manage risk and can lead to more stable returns over time.

In the past weeks, several key events have affected stock market performance. The Federal Reserve held its benchmark fed funds rate steady at 5.25% – 5.5% at its latest meeting. This decision reflects the Fed’s cautious approach as it waits for more data to confirm a sustained reduction in inflation. This move, while anticipated, has caused some short-term volatility as investors adjust their expectations for future rate cuts. ¹

At the same time, the latest Consumer Price Index (CPI) report showed a 3.0% increase for the twelve months ending in June 2024, down from 3.3% in May. This decline in inflation has raised hopes that the Federal Reserve might start cutting interest rates later this year. The positive inflation data has provided some relief to the markets, contributing to the overall upward momentum. ²

Global events also continue to impact the financial landscape. Ongoing conflicts in Ukraine and the Middle East, along with economic challenges in China and the European Union, have created a backdrop of uncertainty. Further, continued fighting in the Middle East and Japan’s shift in monetary policy were contributors to the recent correction in the Japanese market and a drop in the dollar-yen exchange rate. These events contribute to short-term volatility but also highlight the importance of a well-diversified investment strategy to mitigate risks associated with geopolitical tensions.

In addition, recent corporate earnings reports have been positive, supporting the market’s upward trend. Companies in healthcare, finance and consumer goods have reported strong results, emphasizing the benefits of a diversified portfolio. These sectors have helped to balance the gains seen in the technology sector, providing a more stable and robust market performance. ³

The U.S. economy continues to show resilience despite high interest rates and inflation still above its 2% target. The International Monetary Fund (IMF) forecasts that the U.S. economy will expand at a rate of 2.7% in 2024, outpacing other major developed countries. Key drivers of this growth include a strong labor market, sustained consumer spending and increased investment in domestic manufacturing and supply chains. ⁴

As we approach the upcoming presidential election, political developments have been both remarkable and concerning. One candidate was urged to step down by his own party, while another faced an assassination attempt. Despite the political turmoil, it is important to remember that historically, the president’s party has had little impact on long-term stock market returns. Investors should remain focused on economic fundamentals, corporate earnings and inflation. ⁵

Looking ahead, we remain optimistic about the market’s prospects. While market corrections are inevitable, the underlying economic conditions do not currently suggest a significant downturn. The advancements in technology, healthcare and other sectors continue to provide growth opportunities.

We encourage you to take advantage of the current market conditions to review your portfolios and ensure it is aligned with your long-term goals and risk tolerance. Your Investment Advisor Representative is available to review your positioning and assist in determining if you are approaching your desired outcomes.

As we reflect on the first half of 2024 and look forward to the challenges and opportunities of the remainder of the year, we want to express our sincere gratitude for your trust and partnership. Your business is greatly appreciated and we remain committed to guiding you through the financial landscape.

In these times of uncertainty, it is important to remember that successful investing often requires a focus on the long term. By maintaining a perspective beyond the immediate horizon, you can navigate through market fluctuations and make sound decisions that align with your financial goals. We look forward to continuing this journey with you and assisting in achieving your long-term objectives.

Citations

1. Federal Reserve meeting notes, July 2024.
2. Consumer Price Index data, June 2024.
3. Recent corporate earnings reports, July 2024.
4. International Monetary Fund forecast, 2024.
5. Historical analysis of presidential impact on stock market returns, 2024.