Midyear Recap

We’re now halfway through 2024. So, it’s appropriate to evaluate the year in the markets and the economy. The best way to describe both, “remarkably resilient.”

Let’s start with the economy. It was expected to cool given the drag from higher interest rates. And, while recent data seems to be showing a modest slowdown, the economy has largely held up better than most people forecasted.

Inflation has moderated without crushing the economy. The regional banking issues of a year ago came and went without a full-blown crisis. Commercial real estate, while still under pressure, has not been as bad as many feared. And, GDP has hummed along at a slower pace, but nothing close to recessionary.

Inflation has moderated without crushing the economy.

That does not mean each individual, family or business has had similar experiences. Far from it.

If you look at the government’s monthly jobs data, businesses continue reporting solid job growth. But, when they ask individuals, they’re finding a higher rate of people saying they’re unemployed.

And, that divergence is part of the ongoing story.

And, that divergence is part of the ongoing story.

Whether we’re talking about households or businesses, those at the top have fared better than the rest.

Higher interest rates weigh on households and businesses who need to borrow more money than they can save. But, they propel those who save more than they need to borrow. If you’ve got plenty of cash, you can outpace inflation by simply holding money market funds, CDs or high-yield savings.

You can see that reflected in the vast dispersion in the markets. So far, 2024 is playing out very similar to 2023.

You can see that reflected in the vast dispersion in the markets.

Small companies, as reflected by the Russell 2000, are barely positive on the year (and actually down over the last 3 years). Meanwhile, mega cap technology companies have performed far better. Top companies in the Nasdaq 100 have vast amounts of cash, and growth that is producing even more. So, they simply don’t have a pressing need to borrow greatly at today’s rates.

On the surface, the markets are having a terrific year. Under the hood, it’s more mixed. Those floating in the river of AI are being pushed forward by the current. Meanwhile, a large chunk of the market is stuck along the banks, treading water.

How to think about the future? The market gets fixated on particular areas or narratives just as we do in our own lives. Right now, the market is fixated on artificial intelligence and the increased productivity it will bring. As long as the economy holds up and the AI story remains intact, the market’s focus can easily remain there.

The market gets fixated on particular areas or narratives just as we do in our own lives.

If either narrative falters, however, the market will likely shift its focus and that will introduce new opportunities and new risks. It’s a fool’s errand to predict how or when that will happen. But, it’s the reason you want to remain diversified even if it seems like the only place to float your investments is in the River of AI.

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index.