Equity and bond markets began the second quarter of 2024 with a rough start, thanks to the Federal Reserve’s decision not to reduce interest rates due to stubbornly high inflation rates. However, during the quarter, strong performances from companies tied to artificial intelligence and a more favorable outlook on inflation numbers changed that perspective, and investors saw multiple all-time-high days, and many records were set for equities. Markets improved in May, and during the quarter, 31 records were set for the S&P 500. As a follow-up to the strongest first quarter since the pre-pandemic days of 2019, investors continued to enjoy the bull run in the second quarter.
Big tech and large communication companies contributed disproportionately to the equity market’s rise. The continued confidence in artificial intelligence and the prospect of it ushering in a new era of technology helped fuel the S&P 500. The boom in the technology sector of the market is being led by companies referred to as the “Magnificent Seven.” For the first half of 2024, these seven companies, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, have all helped drive the market. For the quarter, Nvidia alone advanced Morningstar’s U.S. Market Index by 1.6%.
As June ended, all three major indexes were up for the year, with the S&P 500 up approximately 15% and the Dow Jones Industrial Average (DJIA) rising almost 4%.
For the second quarter, the S&P 500 returned nearly 4% and closed at 5,460.48. The Dow Jones Industrial Average (DJIA), which has less of a tech influence, crossed a new milestone of 40,000 in May but ended the quarter at 39,118.86, down about 1.7%. (www.cnbc.com; 6/28/2024)
KEY TAKEAWAYS:
- Equity markets closed out the first half of 2024 with strong results.
- The Fed held the federal funds rate range steady at 5.25 – 5.50%, with no changes in the second quarter.
- The Fed is no longer anticipating three rate cuts as previously expected.
- Inflation rates are still above the Fed’s desired 2% goal.
- Both the economy and equity markets remain strong.
- Staying the course and maintaining the consistency of a well-devised, long-term focused plan has historically served investors well.
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