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Monthly Market Commentary

June 2024


    • U.S Equity Markets continued their upward movement in June, with the S&P 500 reaching new highs, up 3.59% for the month and 4.27% for the quarter. However, there was no broadening of market participation in June as we saw in May. 
    • The NASDAQ was up 6.10% for the month, while the small-cap Russell 2000 was down 0.48%. 
    • On a Quarter to Date (QTD) basis, the S&P 500 was up 4.26%, the NASDAQ was up 8.56%, the small-cap Russell 2000was down 3.23%, and the non-US EAFE index was down 1.63%. 
    • On a Year to Date (YTD) basis, the S&P 500 was up 15.25%, the NASDAQ was up 18.59%, and the Russell 2000 was up 1.84%. 
    • The EAFE index is up 5.69% YTD. 
    • In June, the S&P 500 was up 3.59%, with only three sectors, Information Technology, Consumer Discretionary, and Communication Services, up more than the S&P 500. Mega cap stocks were behind this significant differential. The Information Technology sector was by far the best-performing sector for the month, up 9.31%. Consumer Discretionary was up 4.9%, and Communication Services was up 4.8%. Six of the eleven sectors were down in June.
    • Earnings for U.S. companies continued to show improvement. For the first quarter of 2024, the S&P 500's Earnings per share (EPS) grew 6%. Expectations are for the S&P 500 to have earnings growth of 9% in the 2nd quarter of 2024 and double-digit growth for 2024 and 2025. The acceleration of earnings will continue to support a strong equity market.
    • In June, the benchmark 10-year Treasury yield declined from 4.51% to 4.39%, bottoming at 4.20% mid-month. The first G7 central banks started an easing policy, lowering their interest rate from 5% to 4.75%. This was followed by the European Central Bank cutting its key rate by a quarter point from 4% to 3.75%. These actions are generally viewed as part of a multi-year rate-cutting cycle.
    • When the Federal Reserve's Open Market Committee (FOMC) met on June 11th, they voted to keep the benchmark interest rate at its current level, as expected. The committee gave a "soft landing" outlook in their SEP (Summary of Economic Projections) that markets liked. The FOMC members' collective forecast in the SEP report is for interest rates to have only one quarter-point cut by the end of 2024, a notable shift from the three cuts projected earlier this year. The futures market indicates two Fed Funds rate cuts by the end of 2024.

    For the quarter ending June 30th, the S&P 500 was up over 4%, up over 15% YTD. The quarter started in April with the first monthly decline in the S&P 500 since last October. April was down as reports of U.S. economic strength pushed out expectations of an impending Fed Funds rate cut and unrest in the Middle East. The Yield on the benchmark U.S. Treasury went from 4.2% to 4.6% in April. Many of the best-performing stocks for the year gave back some of their returns that month. "Momentum" stocks outperformed all this year but underperformed in April.

    In May, the U.S. stock market reached multiple new highs, with the renewed broadening of equity market participation. For May, the S&P 500, NASDAQ, and the Russell 2000 increased by over 4.9%. New inflation reports were not as disappointing as the previous reports and had a calming effect on the market. The market adjusted the expected six Fed Funds rate cuts to two or fewer rate cuts in 2024. Toward the end of May, markets focused more on earnings reports showing increased growth.

    In June, U.S. equity markets achieved multiple new highs again, with a renewed focus on "macro" stock-specific factors, new inflation reports, and a Federal Open Market Committee (FOMC) meeting. We have seen in 2024, in fits and starts, a broadening of equity markets, with more sectors and asset classes participating in upward movements, which was not the case in June. Optimism regarding AI (Artificial Intelligence) and general strength in "Magnificent Seven" stocks made June seem like 2023 regarding market concentration.

    In June, the S&P 500 was up 3.59%, with only three sectors, Information Technology, Consumer Discretionary, and Communication services, up more than the S&P 500. with Mega cap stocks were behind this significant differential. The Information Technology sector was by far the best-performing sector for the month, up 9.31%. Consumer Discretionary was up 4.9%, and Communication Services was up 4.8%. Six of the eleven sectors were down in June.


    In June, the benchmark 10-year Treasury yield declined from 4.51% to 4.39%, bottoming at 4.20% mid-month. The first G7 central banks started an easing policy, lowering their interest rate from 5% to 4.75%. This was followed by the European Central Bank cutting its key rate by a quarter point from 4% to 3.75%. These actions are generally viewed as part of a multi-year rate-cutting cycle.

    When the Federal Reserve's Open Market Committee (FOMC) met on June 11th, they voted to keep the benchmark interest rate at its current level, as expected. The committee gave a "soft landing" outlook in their SEP (Summary of Economic Projections) that markets liked. The FOMC members' collective forecast in the SEP report is for interest rates to have only one quarter-point cut by the end of 2024, a notable shift from the three cuts projected earlier this year. The futures market indicates two Fed Funds rate cuts by the end of 2024.  


    Source: Bloomberg


    Overall, the themes have been correct and still hold. The Fed did end its rate hike cycle, although the expectation of rate cuts has been pushed off. Bond yields will gradually decrease in 2024, led by moderating inflation, more accessible Fed policy, and softer economic activity. Eventually, as inflation moderates and the Fed joins other countries on a rate-cutting cycle, this should spark lower rates and improved economic momentum beyond 2024. For this reason, we still recommend extending the duration.

    Earlier in the month, we talked about broadening market participation, with market leadership rotating and broadening out, which certainly didn't happen in June. We expected economic growth to slow but not collapse; GDP numbers and earnings expectations suggest that. Earnings projections toward the end of the year and into 2025 show that the relatively superior earnings growth of tech companies compared to other sectors should lessen. A shift toward easing rates by the Fed could help the relative performance of more value-oriented cyclical companies and small-cap stocks.

    Although we may still see a Tech-AI-driven market, we expect greater breadth in future gains, which would be healthy for continued equity growth. Admittedly, market breadth could have been better YTD than we had thought, particularly in June.

    We expect more near-term market volatility due to the election, concerns about economic growth, a lack of clarity regarding the Fed, and profit-taking. Because the long-term positive themes are still intact, the near-term volatility should be viewed as an opportunity to diversify equity exposures into underperforming sectors and market caps and to extend the duration of fixed-income investments.

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