Weekly Review for week ending 6/28/24
June Market Performance
The stock market made some impressive moves in June, with the S&P 500 advancing 3.5% and the NASDAQ adding 6%. The total return on the S&P 500 at the halfway point for the year stands at a remarkable 14.48%. In contrast, small-cap stocks are having a completely different experience, with the S&P Core Small Cap Index down 1.47% year-to-date (FactSet). Small companies are more sensitive to tighter monetary policy and have less cash on hand to weather hard times. However, I believe they are still great long-term investments and expect they will recover strongly when interest rates begin to fall.
Top-Heavy Returns
The distribution of returns in the S&P 500 is quite top-heavy, with NVIDIA contributing roughly 30% of the total return so far this year. Apple, Microsoft, Amazon, Google, Meta, and NVIDIA have collectively contributed about 9.5% of the index's 14.5% return year-to-date (Factset). Historically, the stock market has seen periods where a handful of companies make up an outsized portion of the market's returns, but the current return concentration is unusually high. A common theme among these companies is their involvement in AI. I expect this concentration to continue and intensify as AI is still in its infancy.
Housing Market Trends
Pending home sales declined by 2.1% in May, compared to expectations for a 1.0% increase, according to the Pending Home Sales Index (PHSI). This followed a decline of 7.7% in April. The continuation of decreasing demand, along with an increase in existing home sales from 1.2 million to 1.28 million, indicates reducing demand for homes at current prices, which should create downward pressure on prices and contribute to lowering inflation.
Inflation and Federal Reserve
The Personal Consumption Expenditures (PCE) index, the Fed's preferred measure of inflation, came in at 2.6%, a reduction of 0.1% from 2.7% in April. This slowing inflation reading echoes the Consumer Price Index (CPI) readings from earlier in the month. These trends are exactly what the Fed wants to see as they aim to reduce the country's inflation to 2%. I expect they will lower rates by 0.25% in the final quarter of the year.
Upcoming Events
This week, we have a short trading week with Independence Day closing the markets on Thursday. We'll also be watching the unemployment numbers coming out on Friday to see if the recent increasing trend continues.
As always, if you have any questions or concerns, feel free to reach out. I'm here to help and discuss any of these developments with you.
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
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Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.
Investing in smaller companies involves greater risks than those associated with investing in more established companies, including significant stock price fluctuations and illiquidity.
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results
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