Market Commentary: Q2 2024
The U.S. financial markets experienced strong performance and resilience in the first half of the year. Major stock indices, such as the S&P 500 and Nasdaq Composite, hit record highs during this time period. Much of the rally is attributed to the robust performance of a select group of mega-cap stocks, particularly those benefiting from artificial intelligence (AI) innovation. The market run up in 2024 began similarly to how 2023 ended, with markets rising amid talk of a potential decrease in US inflation and the potential associated interest rate cuts from the Federal Reserve that could follow. But much like last year, those expectations remained unfulfilled as core inflation fell slightly but held above 3%, and the Fed stood firm on interest rates.
By most measures, the U.S. economy continues to be performing strong. With relatively few notable dips, each major index has shown steady growth throughout the year. Also, overall job growth has been consistent even though the unemployment rate has seen incremental increases and reached the 4% mark in June, a level not seen since January 2022.
As we move into the second half of the year, financial markets could face potential challenges shaped by a myriad of reasons, including: geopolitical tensions, anticipation of rate cuts, mixed economic data, and a controversial election cycle. While investor emotions may run high, history has shown that markets can perform well under both Democrat and Republican political control (See Chart 1). As the accompanying chart shows, the economy and stock market have grown decade over decade regardless of which party was in the White House, and what actually mattered more across these time periods’ market performance was the ups and downs of the business cycle.
Chart 1: The Stock Market and Presidencies
S&P 500 price returns on a log scale with presidents and their parties highlighted since 1933
Of course, politics can and does impact taxes, trade, industrial activity, regulations, and many more areas which affect financial markets. However, not only do these policy changes tend to be incremental over a continued time period, but in addition the exact timing and effects of these policy changes tend to often be overestimated. This is a reminder that it is important to focus less on the day-to-day election poll results and more on the long-term economic and market trends of the overall financial markets.
Market Summary
Quarter 2 & Year-to-Date 2024 Index Returns
Invest Where it Really Counts
As we venture into the third quarter of 2024, we hope to continue to see both economic growth and a reduction in inflation. Eventually, interest rates are expected to decline, but the timing and rate of reduction is dependent on when the Federal Reserve Board decides that inflationary pressure has slowed dramatically. We understand that stocks do not move in a straight line and market volatility is beyond our control, however our team is prepared to help navigate you through any situation that may arise.
Stay the course and remain focused on the long-term, the reasons you chose to invest, and the things you can control. If you have a loved one that may be in need of our expertise and guidance, we would value the introduction. We thank you for trusting Petersen Hastings Wealth Advisors to help you discover where you’re most invested in life and build you the financial freedom to live it.