2024 Q2 Market Review
2024 Q2 In Review
Is the Optimism Easing?
What we saw:
The story of the second quarter largely followed the path we expected, continuing an increasingly familiar intra-quarter dynamic. For three quarters now, we have seen initial weakness in the first month of the quarter, followed by optimism taking over, resulting in strong returns in the last two months of the quarter. The second quarter of 2024 was no different; in April we saw negative returns in the S&P 500, reflecting market participants' rising uncertainty about the future. At the time, the debate surrounding when the
As you can see in the chart below, the first major news in the quarter was the consumer price index ("CPI") coming in at 0.4% month-over-month and 3.5% year-over-year in March (reported on
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Source: Bloomberg. S&P 500 hourly price
The
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2024 Q2 In Review
What we're watching:
Optimism won out in Q2, but it seems like cracks are beginning to show. April saw a larger decline than any month in Q4 2023 or Q1 2024. During the quarter, the market appeared to follow the economic news more closely, instead of ignoring it like it seemed to in previous quarters. A bad inflation report was generally followed by a downward market, while a good inflation report was generally received with an upswing. In our minds, this indicates the spirit of optimism is waning. In our view, the market is starting to act more realistically.
It is harder to predict what the future will bring in this environment. On one hand, we believe the
"Buy the rumor, sell the news" is an old stock market adage that encapsulates the market's ever forward-looking tendency. It is not uncommon for the market to move up in anticipation of an event (the rumor) only to fall after the event (the news) because there is no longer something positive to look forward to. This is why we often see companies experience a rise in share price just before reporting earnings then fall shortly after reporting better than expected earnings. Often, the fall in stock price after an earnings release is because forward guidance is weak.
This happened to
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Getting back to the current market, we believe that with the Fed potentially cutting the Policy Rate in September the market will look forward to further Policy Rate cuts in 2025, and therefore do not expect a negative market reaction to the news.
While some positive economic data and double-digit growth in the S&P 500 to start 2024 has kept recession concerns to a whisper, we do believe a recession is still possible. Slowdowns have been projected in some industries, and earnings growth expectations are moderate to high right now, so a recession could bring the stock market lower. Should a recession creep into view
1INTC closing price from
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2024 Q2 In Review
the
Looking forward, we will be paying attention to inflation and what the
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The statements and opinions expressed here are those of the author. Any discussion of investment strategies represents the author's views as of the date of the articles and are subject to change without notice.
Past performance does not guarantee future results. Investing involves risk, including the loss of principal.
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S&P 500 Index: The S&P 500 is a market-capitalization-weighted index of 500 leading publicly traded companies in the
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