The stock market rally continued in the first half of 2024, with the S&P 500 gaining 14.5% during this period. Nvidia played a significant role in this rally, accounting for over a third of the gain. The S&P 500 reached 31 all-time closing highs, despite no rate cuts from the Federal Reserve. The Dow Jones Industrial Average had a more modest gain of less than 4% for the year. Stocks like Nike, Intel, and Boeing experienced declines of over 30%. The best-performing sectors were technology and communication services, with the AI sector leading the way.
Nvidia's share price jumped 150% in the first six months, making it briefly the largest company in the S&P 500. Other top-performing stocks in the technology sector were Super Micro Computer, Micron Technology, and CrowdStrike. Microsoft, Amazon, Meta Platforms, and Apple also saw gains. Investment banks have raised their year-end targets for the S&P 500, with some projecting a 15% rally. However, one bank remains cautious about the ability of mega-cap stocks to sustain their earnings growth rates. The US election in November and the second-quarter earnings season will also impact the performance of the S&P 500. The Federal Reserve's expected interest rate cuts and easing inflation may provide added momentum for the equity market [39c81f24].
The S&P 500 jumped nearly 15% in the first half of 2024, according to The Motley Fool [b6a1f689]. The index has a historical tendency to rise in the second half of the year, regardless of its performance in the first half. In the last 40 years, the S&P 500 has risen in the second half of the year in 29 instances. It has been particularly successful in the second half of years when it experienced double-digit gains in the first half. Out of the last four decades, the S&P 500 has only fallen in the latter half in 11 years. Since 1984, the index has risen in the second half of the year 21 times out of 28 instances when it gained in the first half. When the S&P 500 had a double-digit percentage increase in the first half of the year, it also rose in the second half in 13 out of 15 instances. In presidential election years, the S&P 500 tends to perform positively. Since 1984, the index has risen in six out of eight years when a U.S. presidential election was held. Over the last four decades, the S&P 500 has delivered a positive return in the second half of the year in eight presidential election years, compared to only two years when it declined. The current macroeconomic environment, with a strong U.S. economy and low unemployment, suggests that the S&P 500 is likely to deliver a positive gain in the second half of 2024 [b6a1f689].
In terms of commodities, cocoa and gold prices soared, while the Japanese yen slumped to a 38-year low against the US dollar. The US economy has sustained solid growth despite high inflation. Job gains have exceeded expectations, and the Federal Reserve has indicated that an additional rate increase is unlikely. Tech firms leading the adoption of AI, such as Alphabet, Amazon, Apple, Meta, Microsoft, Tesla, and Nvidia, have seen significant gains. However, experts warn that the stock market may struggle to sustain returns and face threats from high interest rates, inflation, and uncertainty surrounding the November election. While there may be growth in the stock market for the remainder of 2024, it is expected to be at a slower pace than the first half of the year. The long-term outlook for the market remains favorable.
Analysts predict that stocks can continue to climb in the second half of 2024, supported by modest earnings acceleration, a moderating economy and inflation, and a year-end rally during presidential election years. The S&P 500 Index is expected to reach 5,725 by the end of the year, a gain of 4.6%. However, risks are mounting with elevated valuations and a concentrated rally in a few tech stocks, making the market vulnerable to bigger drawdowns. Some strategists recommend diversifying away from mega-cap tech stocks and investing in undervalued areas like small-cap and value stocks. Economic growth is expected to cool in the coming months, but a recession is unlikely. GDP growth is forecasted to be 2.4% for 2024. The Federal Reserve is expected to make one or two interest rate cuts starting in September or December. Analysts anticipate a deep rate-cutting cycle to combat lower inflation and rising unemployment. However, the path of interest rates depends on the economy's performance. Traders see a 60% chance of a rate cut in September and a 32% chance in December [39c81f24].