“Life moves pretty fast. If you don't stop and look around once in a while, you could miss it.”
— Ferris Bueller

When we began 2024, six interest rate cuts were expected. But with stickier-than-expected inflation and strong job growth, markets significantly lowered those expectations. As a result, rising interest rates created headwinds for rate-sensitive assets, although a resilient economy helped lower-credit-quality parts of the fixed income market (e.g., high-yield and bank loans) outperform their higher-credit-quality counterparts.

Anyone familiar with the movie Jerry Maguire knows the phrase, “Show me the money!” Well, after several quarters of beating low expectations, it’s time for companies in the S&P 500 to show us the money and put up solid earnings growth. Analysts expect earnings growth of 8.8 percent as of July 3, 2024, which would be the highest growth rate since Q1 2022 when it was 9.4 percent.

The story of 2023 was the recession that never was and the end of the interest rate hiking cycle. Corporate earnings growth beat expectations, and the S&P 500 saw a 26 percent return. And in the first half of 2024, that upward trajectory largely continued. Large-cap stocks have led the way, while mid- and small-caps have lagged. Value stocks have underperformed growth stocks, with higher earnings growth for growth stocks keeping them in the lead. 

In my last blog post written just over three months ago, I discussed the S&P 500’s notable Q1 return and its historic five-month return. Historically, both indicated that a strong Q2 return was likely. Fast-forward three months and the S&P 500 posted a Q2 return of 3.92 percent.

June was a good month for markets, with most indices up in the low- to mid-single digits. The S&P 500 and Nasdaq hit new highs during the month, and bond returns were positive due to falling interest rates. International markets were more mixed in June, as developed markets fell on rising political uncertainty while emerging markets were up for the month. Solid fundamentals and an improving economic backdrop helped support returns in June.

Recently, inflation and interest rates have dominated the headlines. And for good reason—they are known market and economic risks. But as we look toward the second half of 2024, investors must also be prepared to navigate the geopolitical risks, whose twists and turns can often lead into uncharted territory.

Many Americans will be tuning in to tonight’s first presidential debate not just for the entertainment but to gauge what policies the candidates lay out and how they could affect their portfolios. But the truth is that nearly half the world’s population will face national elections this year, with several already concluded. It’s important to keep in mind that these elections will impact those portfolios with significant international exposure and those with U.S. exposure. 

So far in 2024, the U.S. economy has traveled a winding road. As we began the year, expectations were for turbulence ahead, given stubbornly high inflation and interest rates, restrictive monetary policy from the Fed, and a slowdown in consumer and business spending. Instead, strength in hiring fueled consumer spending despite rising rates. Still, GDP growth slowed to 1.3 percent in the first quarter (from 3.4 percent in the fourth quarter of 2023), leading to more uncertainty on where the economy will go in the second half of the year. 

As the fears about Y2K dissipated and the dot-com boom entered its last few months, the world’s equity investment opportunity set was split roughly 50 percent in the U.S. and 50 percent in the rest of the world. Fast-forward to today, and approximately 64 percent of global market capitalization is in the U.S. This shift has resulted from the U.S. equity market’s outperformance since the end of the great financial crisis more than a decade ago.