Taking Stock: Executive Summary June 30, 2024
Quarterly Executive SummaryQ2 In Review:
The quarter got off to a rough start in April, as stubbornly high inflation led to revised expectations for interest rate cuts, sending stocks falling and breaking a five-month winning streak. But stocks bounced right back in May, as improving inflation data and strong corporate earnings boosted the market. Despite the Fed decreasing expectations for rate cuts (down from three to just one during 2024) most major indices finished the quarter up.
Overall, it was another good quarter for the record books, building on a strong first quarter. The U.S. economy continued to grow (albeit at a slower pace). The job market remains solid, although cooling. Inflation is easing, and the Fed expects to start cutting rates later this year.
Recent Economic Data:
Four years ago, the world economy came to a screeching halt, and since then we have been waiting for the post-pandemic recession to hit (as has been the experience for many of the world’s economies). However, the U.S. economy continues to grow, and America is in pretty good shape according to most economic indicators.
Gross Domestic Product (GDP). The GDPNow model estimate for real GDP growth in Q2 2024 is 1.5% (seasonally adjusted annual rate; estimate released July 3, 2024) – largely unchanged from 1.4% in Q1 2024. A growth rate between 2% and 3% is commonly considered “normal.” While showing signs of slowing, the U.S. economy has proven surprisingly resilient in the face of higher interest rates.
Unemployment. Total non-farm payroll employment rose by 206,000 in June, and the unemployment rate was at 4.1%. The June report marked the first time since 2021 that the unemployment rate clocked in above 4%, a sign that the labor market is gradually slowing down.
Consumer Confidence. The Conference Board Consumer Confidence Index, an indication of consumer attitudes and buying intentions, dipped in June to 100.4, down from 104.7 in March (1985=100).
Consumer Price Index (CPI). The CPI for All Urban Consumers (CPI-U), a measure of inflation which shows “cost of living” fluctuations, was unchanged in May after rising 0.3% in April. Over the last 12 months, the CPI-U increased 3.3% before seasonal adjustments, a decline from 4.0% for the 12 months ending May 2023.
Earnings. For Q2 2024, the estimated (year-over-year) earnings growth for the S&P 500 is 8.8%. If this is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate since Q1 2022 (9.4%). Corporate profits remain healthy, which could result in continued stock gains.
Housing. Privately-owned housing starts in May 2024 were at a seasonally adjusted annual rate of 1,277,000, 19.3% below May 2023. High mortgage rates and low inventory continue to challenge the housing market, as the sales slump pulls into its third straight year. Homebuilder confidence declined six points in May to 45, falling below the threshold of 50, indicating a negative outlook.
Looking Ahead:
As we enter the second half of 2024, most economists believe equities can continue to rise but warn of headwinds (persistent inflation and geopolitical conflicts top the list). And while growth is expected to cool, a recession during 2024 is not considered likely.
Ed Clissold, chief U.S. strategist at Ned Davis Research wrote at the end of June, “The modest earnings acceleration is continuing, the economy and inflation appear to be moderating enough for the Fed to lower its benchmark rate, and the market tends to enjoy a year-end rally during presidential election years.” While hard to imagine in early 2020, barring unforeseen circumstances, we expect the U.S. to continue its unexpectedly robust post-pandemic economic performance.
Really, America’s stunning economic resilience should be no surprise. If history has taught us anything, it’s that we are resilient.
Last week we came together to celebrate 248 years as a nation. (Happy Birthday, America!). Over this time, the United States has been torn apart by civil war, financially decimated by the Great Depression, ravaged by pandemics and devastated by disasters. And through it all, Americans find a way to bounce back. It’s what we do. It’s how we conquered a new continent, faced extraordinary peril and became the world’s greatest nation. And it’s how we continually correct course and steer our nation back to the path of prosperity.
"America is another name for opportunity." – Ralph Waldo Emerson
| Index | June 30, 2024 | Q2 |
| DJIA | 39,118.86 | -1.73% |
| NASDAQ | 17,732.60 | 8.26% |
| S&P 500 | 5,460.48 | 3.92% |
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Executive Summary Sources:
https://www.federalreserve.gov/monetarypolicy/fomcpresconf20240612.htm
https://www.atlantafed.org/cqer/research/gdpnow
https://www.bea.gov/news/2024/gross-domestic-product-third-estimate-corporate-profits-revised-estimate-and-gdp-industry
https://www.bls.gov/news.release/pdf/empsit.pdf
https://www.conference-board.org/topics/consumer-confidence
https://www.bls.gov/news.release/pdf/cpi.pdf
https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_070324.pdf?hsCtaTracking=31d0f488-5c02-4193-b93b-f1708067f4fa%7Cb994622e-6b82-4c98-ad34-76c848088314
https://www.census.gov/construction/nrc/pdf/newresconst.pdf
https://www.wsj.com/economy/jobs/jobs-report-june-unemployment-economy-68275d9e?mod=economy_trendingnow_article_pos1
https://www.investing.com/economic-calendar/nahb-housing-market-index-218#:~:text=The%20National%20Association%20of%20Home%20Builders%20%28NAHB%29%20Housing,on%20home%20sales%3B%20below%20indicates%20a%20negative%20outlook.
https://www.azquotes.com/author/4490-Ralph_Waldo_Emerson/tag/opportunity
https://www.morningstar.com/indexes/dji/!dji/performance
https://www.morningstar.com/indexes/xnas/@cco/performance
https://www.morningstar.com/indexes/spi/spx/performance
https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI
https://finance.yahoo.com/quote/%5EIXIC/history?p=%5EIXIC
https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC
The views expressed represent the opinion of Asset Management Financial Solutions, Inc. (“AMFS”) and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and AMFS’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.