What Investors Need to Know for the Second Half of 2024
Despite a brief 6% correction in the latter part of the first quarter, the stock market has shown resilience and growth in the first half of 2024.
Keep reading for factors contributing to this and what you need to know.
Federal Reserve’s Stance on Interest Rates
The market’s performance has been driven by the anticipation of interest rates finally coming down.
With stubborn inflation indexes like the Consumer Price Index (CPI) showing signs of easing over the last 3 months, Federal Reserve Chairman Powell has expressed increased confidence in the potential for monetary policy easing.
The market has interpreted this, along with solid economic growth and a slight weakening in the labor market, as a positive sign for continued growth.
Historical Precedence and Market Concentration
Since 1928, there have been 29 instances where the S&P 500 has risen over 10% in the first half of the year.
On average, the full-year return during those 29 times was 24%, so we still think we have some upside based on the explosive earnings we’re seeing.
However, it’s important to note that the S&P 500’s performance has been highly concentrated, with just 5 stocks accounting for approximately 60% of the index’s gains.
As interest rates are expected to be cut by the September meeting, the market is starting to broaden out, with other sectors and smaller capitalization stocks beginning to perform well.
The AI Revolution: Driving the Market Forward
A new industrial revolution, powered by artificial intelligence (AI), is expected to drive the market forward in the coming years.
The anticipation of improved earnings, margins, and increased efficiency across various industries has contributed to the strong performance of AI-related stocks, such as Nvidia and Super Micro Computer.
While investing in AI stocks can be lucrative, be prepared for volatility and ensure that your risk tolerance is appropriate.
As with any emerging technology, there will be companies that succeed and others that may not stand the test of time.
Looking Ahead: Continued Growth and Potential Challenges
As we move into the second half of 2024, several factors point toward continued market growth:
- Lower interest rates and a 95% expectation of a Fed rate cut by September.
- Slowing but still reasonable economic growth.
- Improving earnings and margins.
- The positive impact of AI on various industries.
Check out the video as Mark Sorensen, our Chief Investment Officer, provides further insight into current economic conditions, how the election may affect the markets, and where he thinks we’re headed from here.
Plus chart reviews!
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