We've hit the halfway point of 2024! With a shortened session on Wednesday and Independence Day on Thursday, expect a slow week, writes Jay Woods, chief global strategist at Freedom Capital Markets.
Friday will bring the June unemployment report, otherwise, it’ll be quiet. It’s also a perfect time for companies to drop bad news while everyone is at the beach.
Let’s reflect on 2024 so far and key themes to watch in the second half.
The S&P 500 has surged 14.5%, surpassing all top Wall Street predictions. It’s had 31 new closing highs, though it missed the 32nd last Friday. The tech-heavy Nasdaq 100 leads the charge with a 17% gain, driven by AI stocks like Nvidia, which continues to outperform expectations.
Can the rally continue?
In short, yes. History shows that when the S&P 500 gains over 10% in the first half of the year, it tends to keep rising, with an average second-half gain of 7.7%. Fundamentals are solid with rising earnings, low unemployment, and potential rate cuts. These factors all point to a positive market trend.
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Presidential race
Expect unpredictable headlines. But remember, the market doesn’t care about politics. In both the 2016 and 2020 elections, despite initial sell-offs, the market quickly rebounded. Historically, the second half of the President’s final year sees strong market performance, so brace for potential gains regardless of the election outcome.
Will the Fed Cut Rates?
There’s been a lot of talk about rate cuts, but we’re still waiting. Since 1980, the first Fed rate cut during non-recessionary periods has led to market gains 3, 6, and 12 months out. Small-cap stocks could benefit the most, as the Russell 2000 is only up 1% year-to-date.
Earnings
This week is the slowest for earnings outside the post-Christmas period. We’ll get employment data on Wednesday, with markets closing early. Thursday is a holiday, and Friday brings the unemployment rate and hourly wages report.
That was the week that was
Despite a busy Friday, the last week of June ended quietly. Major indexes were nearly flat, but the Russell 2000 gained 1%, hoping for a rate cut by September. The PCE index’s steady decline hints at a potential rate cut, boosting market optimism.
Nike shocked everyone with a historic 20% drop after missing earnings and lowering guidance. Meanwhile, FedEx shares jumped 14% after beating expectations and announcing cost-cutting measures and a $2.5 billion buyback.
Taking stock
Micron fell 5.7% despite beating earnings, as future forecasts disappointed investors. Walgreens Boots Alliance continued its decline, missing earnings and cutting guidance, ending the week at its lowest level since 1997.
Technology and Communications sectors led gains in 2024, though not as spectacularly as last year. Ten out of eleven sectors rose, with Real Estate the only laggard. Energy, Financials, and Utilities also posted significant gains.
IPO monitor
IPO activity is slowly rising from historic lows, with 39 IPOs raising over $9 billion in the last quarter. This steady increase suggests a healthy market without the frothiness of past peaks, indicating potential for a broad market rally.
As we head into the second half of the year, keep an eye on these themes and stay tuned for more updates. Happy trading!