Research first half 2024

• July 3, 2024,
• Dear Valued Investor, Stocks finished the first half of the year the same way they started — with solid gains. Strong rallies from big tech names and somewhat softer economic and inflation data helped propel the S&P 500 to its seventh monthly gain in the past eight months and set dozens of new record highs. As we close the book on a solid first half for the stock market, we celebrate America’s 248th birthday.  But America isn’t the only birthday we’re celebrating in July. The Federal Reserve’s (Fed) interest rate “pause” turns one year old — the Fed’s last rate hike came on July 23, 2023. Fed pauses (neither rate hikes nor cuts) have generally been good for stocks, especially the longer ones, with gains for the S&P 500 last about eight months in five of the previous six pauses. In the second-longest pause since the 1970s, the S&P 500 is up about 20%, nearing the 22% gain registered during the most extended pause in 2006–2007. This means the current bull market has already captured the average historical gain for year two of a bull market, a few months before its two-year mark on October 12.  So, what might the second half of 2024 have in store for stocks? If history is a guide, more gains are possible, as the first solid halves have historically been followed by above-average second-half returns of about 6.0%. When first-half gains were 10% or greater, the index averaged a 7.7% advance in the second half. S&P 500 companies, in aggregate, are expected to deliver double-digit earnings growth in the upcoming second-quarter earnings season, which may offer near-term support for stock prices — particularly AI beneficiaries. However, bull markets are not linear, and pullbacks or a correction should be expected in the second half. Political and geopolitical risks are rising. The AI trade could fizzle. Inflation data, including the Fed’s preferred measure for May, has cooperated of late, but that could reverse and push yields up again.  Furthermore, this market’s advance has been relatively narrow. Technology and internet stocks have driven 70% of the year-to-date advance, with about 30% coming from NVIDIA. That’s a big gap to fill in a possible tech selloff. Rotating into more attractively valued areas of the market, potentially industrials or energy, might help limit the downside, but that is no sure thing. What is a sure thing is we’ll be by your advisor’s side to provide our perspective in real-time. Everyone has a safe and enjoyable July 4th holiday. Happy birthday, America!  As always,  with any questions. Warmest Regards,

Dana Morton, Chartered Financial Consultant (ChFC)