Second Quarter 2024 Market Commentary and Current Economic Update

Note: Listen to our latest Kitchen Table Podcast Episode where Dave and Nick Discuss this in detail.

S3E25 – Q2 2024 Review and Q3 Outlook

Stock and bond returns were mixed overall for the second quarter. The broad US indices continued to push higher in the second quarter of 2024, driven by the continuing boom in large technology stocks. The S&P 500 index rose 4.28% between April and June, with information technology stocks accounting for 4.08% of that increase while most of the rest of the market lagged or fell slightly. The bond market was mostly positive for the quarter except for 5 – 10-year municipal bonds. Developed international stocks were down for the quarter but remained positive for the year while emerging market stocks rose 5% for the quarter. 

Meanwhile, overall economic indicators remain positive, although there may be some signs of weakness starting to develop. While gross domestic product growth has remained above long-term trends, Mario Nardone and Eric Stein, Chartered Financial Analysts at East Bay Investment Solutions, our portfolio managers, point out that “roughly two-thirds of GDP is driven by consumers, and we know there have been elevated delinquencies for credit cards and auto loans,” often early warning signs of slowing consumer spending. The Federal Reserve has maintained its target interest rate of 5.25% – 5.5%. They have yet to pivot toward lowering rates. 

Rather than predicting or speculating, Mario and Eric like to put the economic situation into a table of positive signs and reasons for concern. Here’s where we stand as the second half of the year opens.

Positive Signals

• Unemployment had been < 4% for 30 consecutive months; it increased to 4.1% in June.
• Growth (GDP) in the US is still solid.
• The May CPI report was a step in the right direction in the inflation fight.
• Even with their high concentration, the top 10 stocks in the S&P 500 are still delivering earnings, on average.

Reasons for Concern

• Is the consumer starting to crack? The consumer drives two-thirds of the GDP and there have been elevated delinquencies for credit cards and auto loans.
• Inflation remains elevated; headline CPI and PCE are still higher than the Fed would prefer; expect a bumpy road toward targeted 2% inflation levels.
• The top 10 stocks in the S&P 500 are highly concentrated; the vast majority of the Q2 return came from the information technology sector

All of this is set against a backdrop of continued international tensions and our contentious Presidential election. You can read their full report and their thoughts on what these signals may mean for the markets here, or you can watch their quarterly video presentation. 

Watch the corresponding Podcast episode on YouTube