07/01/2024 | News release | Distributed by Public on 07/01/2024 16:03
The S&P 500 Index (+3.6%) and NASDAQ Composite (+6.0%) closed June higher for the second straight month, notching their fifth monthly gain for 2024. Solid June gains in NVIDIA (+12.6%) and Apple (+9.6%) helped drive both indexes higher in the final month of the first half of the year. In the middle of June, NVIDIA surpassed Microsoft as the most valuable company on the planet. However, shares of the artificial intelligence chip maker quickly slumped by over 15% amid concerns its valuation had become stretched and the trade had become too crowded. Yet, by the end of the month, shares had recovered some of the lost ground as investors used the opportunity to buy shares.
Importantly, the general momentum for stocks was higher in June and through much of the second quarter. As a result, by the end of the month, stock volatility had reached some of its lowest levels going back to January 2020. From a quarterly perspective, the S&P 500 closed out its third consecutive quarter of gains, finishing higher by +4.3% in Q2. Over the last three quarters, the Index is higher by over +27%, seeing its strongest three-quarter run since the second quarter of 2021. Notably, the S&P 500 is higher in six of the last seven quarters.
As the second half of the year begins, concentrated stock returns, low volatility, and minimal trading volume leave the door open to increasing risk for stock prices should the soft-landing narrative see some unexpected turbulence through year-end. That said, fundamental conditions remain on firm footing, in our view. Should economic and profit growth continue to stay positive in the second half, we see a path higher for U.S. major stock averages, possibly including broader participation, which was lacking in the first half of the year.
Last week in review
The first half in review
Despite a narrowing rally in the second quarter, major U.S. stock averages finished the first half of the year broadly higher. Equity returns, at least for the S&P 500 Index and NASDAQ Composite, rivaled first half returns seen in the late 1990s. Yet nearly 60% of the S&P 500's return in the first six months of the year can be attributed to just five mega-cap stocks (i.e., NVIDIA, Microsoft, Meta Platforms, Amazon, and Apple). In fact, that concentration of leading stocks has narrowed over recent months, with NVIDIA, Apple, and Microsoft driving 90% of the S&P 500's return in the second quarter.
Outside of clear, visible, and secular profit trends across a handful of companies, elevated interest rates, lingering services inflation, slowing growth concerns, and a Federal Reserve on pause have kept a lid on how high the rest of the market has been able to rise given current valuation levels. For instance, the S&P 500's trailing price-to-earnings ratio ended the second quarter 44% above its 20-year average, mostly driven by mega-cap Technology stocks.
Below is a bulleted view of the key market and economic factors that have driven markets so far this year:
The week ahead
The second half of the year opens with key looks at manufacturing and services activity as well as an always important nonfarm payrolls report for June. Trading volume should be rather light this week as markets will be closed on Thursday for the Independence Day holiday.
These figures are shown for illustrative purposes only and are not guaranteed. They do not reflect taxes or investment/product fees or expenses, which would reduce the figures shown here. An index is a statistical composite that is not managed. It is not possible to invest directly in an index. Past performance is not a guarantee of future results.
Important Disclosures
Sources: FactSet and Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as Ameriprise Financial and its analysts. They are not affiliated with Ameriprise Financial, Inc.
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.
Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources. This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor.
There are risks associated with fixed-income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer term securities.
The precious metals market is subject to substantial fluctuations including significant and rapid increases and decreases in value from time to time. Investors must be able to assume the risk of such price fluctuations.
Stock investments involve risk, including loss of principal. High-quality stocks may be appropriate for some investment strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with investing in stocks, as they can lose value.
The products of technology companies may be subject to severe competition and rapid obsolescence, and their stocks may be subject to greater price fluctuations.
Past performance is not a guarantee of future results.
An index is a statistical composite that is not managed. It is not possible to invest directly in an index.
Definitions of individual indices and sectors mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section.
The Dow Jones Industrial Average (DJIA) is an index containing stocks of 30 Large-Cap corporations in the United States. The index is owned and maintained by Dow Jones & Company.
The Standard & Poor's 500 Index (S&P 500® Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices but excludes brokerage commissions or other fees.
The NASDAQ composite index measures all NASDAQ domestic and international based common type stocks listed on the Nasdaq Stock Market.
The US Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. This is computed by using rates supplied by approximately 500 banks.
West Texas Intermediate (WTI) is a grade of crude oil commonly used as a benchmark for oil prices. WTI is a light grade with low density and sulfur content.
The Institute for Supply Management (ISM) manufacturing index is a national manufacturing index based on a survey of purchasing executives at roughly 300 industrial companies. It is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
The ISM Services PMI (formerly the Non-Manufacturing NMI) is compiled and issued by the Institute of Supply Management (ISM) based on survey data. The ISM services report contains the economic activity of more than 15 industries, measuring employment, prices, and inventory levels; above 50 indicating growth, while below 50 indicating contraction.
Personal consumption expenditures (PCE) are a measure of the outlays or how much consumers are spending. The PCE reading is released monthly by the Bureau of Economic Analysis.
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