June 2024 – 3 in 3 Market Update
This month, Jason discusses growth, inflation and monetary policy.
Weaker than expected unemployment numbers and some favorable inflation data points have led to a drop in 10-year bond yields and another rally in stocks. However, this most recent rally has been mostly focused on companies that support the rapid expansion of AI technologies and services.
Market sentiment has picked up accordingly and we are hitting new highs in the S&P 500 Index and Nasdaq. Although 10-year bond yields moved upwards toward 4.75% in mid-May, some favorable inflation data and weaker unemployment numbers have helped yields retreat below 4.25%.
GROWTH
Thus far, US GDP growth for the first half of the year has been slower than 2023. Going forward, the US economic growth outlook for the second half of 2024 is quite mixed, with some predicting even slower growth and others expecting moderate expansion.
In general, economists forecast a deceleration as Federal Reserve’s interest rate hikes and diminishing pandemic savings are seen as dampeners on consumer spending, which has been a major driver of growth.
INFLATION
Inflation is a concern and we have continued to reiterate that inflation is stickier than the consensus wants to believe. And it may be challenging, we think, for the Federal Reserve to get inflation all the way down to its 2% target. The general consensus is that inflation is slowing but a tight labor market and rising wages may delay the pace of this decline.
MONETARY POLICY
The market consensus for rate cuts in 2024 has undergone significant revisions throughout the year. The Federal Reserve lowered its official guidance to only one rate cut of 0.25% in December. However, some Fed committee members still believe two cuts are possible, indicating some lingering optimism.
POTENTIAL RISKS
The Election: The biggest event of the year for America is undoubtedly the November 5th election. As the election draws closer, political risks could grow. November’s election promises to be one of the closest and most divisive races in U.S. history.
Big Tech’s Heavy Influence: The concentration in the US stock market is high and has been increasing in recent years. This means a small number of companies hold a large share of the market’s total value. Key Players have been nicknamed the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla) are a driver of this concentration.