Solid Gains to End the First Half

By Mueller Financial Services, July 3, 2024

Client Letter


Share

Stocks finished the first half of the year the same way they started — with solid gains. Strong rallies from big tech names, combined with somewhat softer economic and inflation data, helped propel the S&P 500 to its seventh monthly gain in the past eight months and set dozens of new record highs along the way. As we close the book on a strong first half for the stock market, we celebrate America’s 248th birthday.

But America isn’t the only birthday we’re celebrating in July. The Federal Reserve’s (Fed) interest rate “pause” turns one year old — the Fed’s last rate hike came on July 23, 2023. Fed pauses (neither rate hikes nor cuts) have generally been good for stocks, especially the longer ones, with gains for the S&P 500 lasting about eight months in five of the last six pauses. In what is currently the second-longest pause since the 1970s, the S&P 500 is up about 20% and nearing the 22% gain registered during the longest pause in 2006–2007. This means the current bull market has already captured the average historical gain for year two of a bull market, a few months before its two-year mark on October 12.

So, what might the second half of 2024 have in store for stocks? If history is a guide, then more gains are possible, as strong first halves have historically been followed by above-average second half returns of about 6.0%. When first half gains were 10% or greater, the index averaged a 7.7% advance in the second half. S&P 500 companies in aggregate are expected to deliver double-digit earnings growth in the upcoming second quarter earnings season, which may offer near-term support for stock prices — particularly AI beneficiaries.

However, bull markets are not linear, and pullbacks or a correction should be expected in the second half. Political and geopolitical risks are rising. The AI trade could fizzle. Inflation data, including the Fed’s preferred measure for May, has cooperated of late, but that could reverse and push yields up again.

Furthermore, this market’s advance has been quite narrow. In fact, technology and internet stocks have driven 70% of the year-to-date advance, with about 30% of it coming from NVIDIA. That’s a big gap to fill in a possible tech selloff. Rotating into more attractively valued areas of the market, potentially industrials or energy, might help limit downside, but that is no sure thing. What is a sure thing is we’ll be by your advisor’s side to provide our perspective in real time.

Everyone have a safe and enjoyable July 4th holiday. Happy birthday America!

As always, please reach out to your financial advisor with questions.

Warmest Regards,

Jeffrey Buchbinder, CFA
Chief Equity Strategist
LPL Research

muellerfinancial@muellersolutions.com
847.888.8600
Mueller Financial Services
https://www.muellerfinancialsolutions.com


Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
All index data from FactSet.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This research material has been prepared by LPL Financial LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Guaranteed
Not Bank/Credit Union Deposits or Obligations | May Lose Value
RES-0001516-0624W | For Public Use | Tracking #598619 (Exp. 07/2025)

Related Insights

June 6, 2024

Stocks Benefit From Solid Fundamental Foundation

ShareApril showers brought May flowers as markets placed greater importance on economic growth and corporate profits than the “higher for …

Read More navigate_next

May 1, 2024

Navigating May’s Stock Market Outlook

ShareAfter a strong first quarter for stocks, some April showers rained down as the S&P 500 fell about 4% last …

Read More navigate_next