So far so good…2nd Quarter 2024 Market Commentary
Technology was still alive and well in the 2nd quarter, with about 20% of the increase in the S&P 500 being due to positive results in this market sector. Nvidia, Apple, and Microsoft alone equal about $10 trillion in market capitalization, which represents a nearly 22% weighting of the S&P 500. Twenty years ago, we would have never anticipated such a significant market impact from three companies. Remarkably, this triumvirates’ accumulative market capitalization equals one third of the U.S. Gross Domestic Product. In addition to the positive market impact from the Technology sector, consumer spending and bullish sentiment have also stoked the fires of the market.
Most stocks however, have not kept pace with the S&P 500 this quarter, but have fared well against the volatile backdrop of the first half of the year. In recent weeks we have also endured an attempted assassination of a former president and current candidate, a global IT disruption, and a change of candidates for the presidential election this fall. We believe there may be continued volatility as we approach the election, as well as from ongoing geo-political risk. That said, there is currently $6 trillion in money market funds, which could still be invested in the equity markets this year. Therefore, we believe the fall will not be much different than the first half of 2024.
Given the recent signals from the Federal Reserve amid positive inflationary indicators, we do believe the Fed will start lowering interest rates in the fall. Lower interest rates will be welcomed news, but the U.S. still maintains a record $35 trillion in national debt, and the prospect of higher taxes to cover these obligations and other government spending is real. The state of the U.S. economy continues to be the wild card in predicting market performance for the remainder of the year. Therefore, we continue to favor “value” investing for clients over the longer term.
Recent corporate earnings are coming in somewhat lower as growth appears to be slowing. Whether or not the Fed has engineered a “soft landing” remains to be seen, so we are taking this opportunity to reassess client cash positions, and in particular, is there enough cash, or dry powder, on hand should there be a significant pullback. We would also encourage clients to check in if you’re feeling uneasy, or simply want to confirm that portfolios are aligned with your goals, objectives, and risk tolerances. We believe that we are well-positioned, but at the end of the day, it’s important that you’re able to “sleep at night” knowing that your portfolio is working for you. To that end, we remain vigilant in our efforts to find appropriate investment opportunities to continue to grow portfolios, while not taking on unnecessary risk.
We wish you all a great rest of summer, and look forward to hearing from you.
Zandy Campbell