2024 has proven to be great for markets thus far. The year-to-date (YTD) return for the S&P 500 index as of the most recent market close is approximately 15.82%. This figure includes both the total return (which accounts for dividends) and the price-only return (based solely on changes in stock prices). Keep in mind that market conditions can fluctuate, so it’s essential to stay informed about any developments that might impact these numbers.
DRIVERS FOR S&P GROWTH YEAR TO DATE
Disinflation: Expectations of further disinflation have supported equities. Cooling price growth makes an interest rate hike increasingly unrealistic, which benefits stocks.
Fed Rate Cuts: While many on Wall Street believe no rate cuts will occur this year, futures markets suggest a policy pivot starting in September. This potential easing supports stock market gains.
Broadening Earnings Growth: First-quarter earnings season has been positive, with over 75% of companies beating estimates. This robust profit growth supports the view for 9% earnings growth in 2024.
Continued AI Investment: Investment in artificial intelligence continues to fuel upside momentum, even as the market broadens out. While the first half of 2024 has been great for investors, the second half of the year may require more caution.
MID-YEAR ECONOMIC OUTLOOK 2024
Economic Growth: The economy is expected to decelerate in 2024 due to the effects of monetary policy and fading post-pandemic tailwinds. Real GDP growth will likely walk the line between slight expansion and contraction, resembling a soft landing. After a better-than-expected 2.8% growth in 2023, anticipate a below-trend 0.7% pace of expansion in 2024. Consumer spending may rise more slowly, while fiscal spending could shift from a positive contributor to a modest drag. Business investment and housing activity are expected to improve, despite higher interest rates.
Monetary Policy: Assuming the hiking cycle is over, the Fed Funds rate is likely to remain at 5.25%-5.5% until mid-2024. Quantitative tightening (balance sheet runoff) will continue, removing approximately $1 trillion from the economy in 2024. Consumer Spending: While consumer spending growth may slow due to factors like diminished excess savings and plateauing wage gains, overall spending should remain positive. Household balance sheets and employment levels support consumer resilience.
Fiscal Outlook: The larger fiscal deficit in 2023 could become a slight headwind in 2024. We expect the federal deficit to narrow to 5.9% of GDP, reflecting some belt-tightening on the spending side and higher interest outlays on government debt.
Whether you’ve achieved growth in line with the S&P thus far, or modest growth as a conservative investor. It’s important to stay aware of current economic trends. This will help you make the adjustments needed to keep you diversified going into the second half of 2024. Thus, preserve your earning and prepare for modest economic performance moving into the second half of the year.
About the Author
Edward Vela is an M&A Advisor and independent Financial Planner with 15 years of wealth management experience. He earned a Journalism Certification from the University of Massachusetts, a BA in Political Science, a Financial Planning Certification at UCLA, and an MBA from the UCLA Anderson School of Management specializing in entrepreneurship and finance. You can contact Edward at 925-300-8805 or the empirikal partners team at empirikalpartners.com.
