Q2’24: Where to Now!

For the first half of the year, the major benchmarks were near all-time highs: the S&P 500 was up 15%, the Nasdaq up 18%, the tech-light Dow up 4%ⁱ. Now, after a few weeks of a market pullback, the S&P 500 is up just 11.6%, Nasdaq up 11.4%, the Dow up 5%.ⁱⁱ

What’s happening? In the first half, investors grew ever more convinced that a soft landing was in sight as inflation numbers resumed their decline after a disconcerting first few months when they bumped higher than expected. Signs of a gradual slowdown in key metrics of the economy — wages, jobs, consumer spending — augured well for more inflation reduction while growth remained strong.

Anything connected to Ai in technology took off with almost 60% of the S&P 500 gain in the first half from five megacap companies- Nvidia, Microsoft, Amazon, Meta and Apple – owned in every client portfolio.ⁱⁱⁱ

With the Fed more than hinting last month that a rate cut could come in September – reasserting their political independence (should they decide to cut pre-election) and for the first time talking about the need to more closely monitor the slowdown in jobs vs. inflation as the top priority.

This unleashed a furious rotation into financial, cyclical and small cap stocks, which by traditional economic theory should do well when the Fed cuts rates, with profit-taking in the megacap highflier names like Nvidia, Eli Lilly, and more to fund new purchases.

Now, with weak manufacturing numbers out last week contracting for the fourth month in a row, combined with Friday’s surprisingly low, July nonfarm payroll numbers and increase in unemployment to 4.3% from June’s 4.1% (Oct. ’21 was 4.3%)^iv, the stock market has spooked, and odds for even more aggressive rate cuts in September and the rest of the year have shot up^v as worries about too much of an economic slowdown bring more profit-taking.

In 2022, the Fed raised rates aggressively and frequently: seven times taking rates from .25-.5% to 4.25-4.50% by year end: ^vi there was nowhere to hide, not stocks, not bonds, not real estate.

Now, with the start of a Fed easing cycle imminent, with multiple cuts possible later this year and into next, stocks should find their footing here as credit and borrowing become easier and cheaper (e.g., think mortgages and the impact on housing!), leading to better earnings, which in the end, is what moves stocks.

As always, we at BD8 Capital Partners continue to focus on your long-term financial future and planning needs, while managing your investments to help meet your financial goals.

CEO Barbara Doran appears weekly on CNBC’s Overtime show to talk about stocks and the stock market, as well as on other news outlets, and we post frequently on Twitter, LinkedIn and our BD8Cap Facebook page if you want to follow our market commentary. Our website also has updates and information about the firm.

Please never hesitate to contact us with any questions or concerns you may have at any time.

Best,
Barb
Barbara Doran
CEO CIO
BD8 Capital Partners LLC
Cell: 917-733-7644
bdoran@bd8cap.com

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