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Market Updates

June 2024 Market Recap: Stock Market Heat Wave

As we move into the second half of 2024, the US economic engine is chugging along.

Strong growth in employment and wages has boosted disposable income for workers. Household net worth continues to climb, pushed up by stock market and house price gains. And consumers appear poised to enjoy summer with a sunny, ready-to-spend mood.

According to JP Morgan chief strategist David Kelly: “consumer spending will likely keep growing, although more slowly, in the months and quarters ahead, suggesting that it would take a significant shock elsewhere to tip the US economy into a recession.”

With sunny skies and no recession in sight, the investment environment for stocks has been hot.

The S&P 500 index of large company US stocks returned 15% in the first half of the year, and strong performance by a handful of big tech companies contributed about two-thirds of the index’s return.

So far in 2024, the S&P 500 Index has made a record high 33 times. The Nasdaq 100 index, which has a large weighting to technology stocks, has made a record high 23 times.

Foreign stock market returns have been less ebullient but still positive. The MSCI’s Europe, Australasia, and the Far East (EAFE) Index has gained 5.8% year-to-date through the end of June.

Here’s a chart from Bloomberg that puts the current stock market rally into historical perspective.

The S&P 500 has posted an 85% advance since 2019 (red line), even despite some challenging stretches, like “Pandemic” 2020 and “Inflation Scare” 2022.

Compare this to the 238% rally during the last five years of the Roaring Twenties (black line) in the previous century, and the 220% climb of the 1990s Internet Bubble (green line).

When viewed from an historical perspective, the current bull market appears to be more run-of-the-mill than exceptional, and less likely to be cited as an example of irrational exuberance that led to an inevitable bursting of a bubble.

The bond market has been a far chillier place to invest so far this year. Short-term bond returns have been in the range of 1-3%.

However, doubts and worries persist about the direction of intermediate-term interest rates. Most recently, market participants are raising concerns about the Federal government’s budget deficit, inflation, and the outcome of the 2024 Presidential election.

Intermediate term investment grade bond yields have risen year-to-date, which means returns for many bonds with maturities beyond three years have been negative so far in 2024. If current bond market trends persist, intermediate-term bonds could post another down year, which would mean losses in three of the last four years.

Here’s a snapshot of stock and bond performance for the last six quarters:

US Stocks = S&P 500 Index; US Bonds = Bloomberg US Aggregate Bond Index


May 2024 Market Recap: Warming Up

April showers gave way to flowers during the first half of May.

Stock market declines seemed to have been a function of early spring. As investors anticipated clearer, brighter weather ahead, they warmed up to stocks, though the warmth faded somewhat during the final week of May.

Large company US stocks, as measured by the S&P 500 Index, rose by 5% in May. Year-to-date, US stocks are in the black by 11.3%. Foreign stocks also returned 5% in May, and thus far in 2024 have gained 7.7%.

Small company US stocks climbed by 4% last month and are up by 4.5% so far in 2024.

Treasury bond yields were stable for shorter maturities but declined slightly for longer-term maturities in May.

For the month, the Bloomberg Aggregate Bond Index, the main benchmark for US investment-grade bonds, registered a positive return of 1.7%. Year-to-date, investment-grade bonds have declined by 1.6%.

Below is a summary of May returns:

US Stocks = S&P 500 Index; US Bonds = Bloomberg US Aggregate Bond Index




April 2024 Market Recap: Pullback

Throughout the month of April, the financial markets were hit by stronger-than-expected inflation readings. The effect was a pushing back of expectations for interest rate reductions by the Federal Reserve, and a pullback of prices for stocks and bonds.

Large company US stocks, as measured by the S&P 500 Index, dropped by 4% in April. Year-to-date, US stocks are in the black by 5.9%.

Small company US stocks fell by 6.5% last month and are up a marginal 0.5% so far in 2024. Foreign stocks declined by 3.25% in April, and thus far in 2024 have gained 2.5%.

The jump in Treasury bond yields in April by somewhere between 0.2 and 0.45 percentage points, depending on the maturity, translated to a fall in bond prices.

For the month, the Bloomberg Aggregate Bond Index, the main benchmark for US investment-grade bonds, fell by 2.5%. Year-to-date, bonds have declined by 3.2%.

 Below is a summary of April returns:

US Stocks = S&P 500 Index; US Bonds = Bloomberg US Aggregate Bond Index


Q1 2024 Market Review

Stocks powered ahead in the first quarter of 2024. For large company US stocks, it was the best quarterly performance since 2019, with the S&P 500 Index registering twenty two “all time high closes” during the three-month period as trading wrapped up on March 28.

Many market forecasters were constructive heading into the start of the year, but few prognosticators predicted the continuation of the powerful rally that began in late October 2023. A resilient economy, confident consumers, and excitement about artificial intelligence were reasons cited for the run-up in stock prices.

For the quarter, large company US stocks returned 10.4%. Small company stocks also rose, but the pace of increase was a slower 5%. Stocks of foreign companies returned 6%.

Bonds, however, finished in the red. Interest rates rose as inflation data disappointed. The Bloomberg US Aggregate Bond Index, the benchmark for high-quality bonds, declined by 0.7% during the quarter.

Here’s snapshot of stock and bond returns for the last five quarters:

US Stocks = S&P 500 Index; US Bonds = Bloomberg US Aggregate Bond Index

Midway through April, stock markets were showing some signs of fatigue after running up so much in Q1.

As of April 19, the S&P 500 Index of large company US stocks had declined by 5% from the end of March, and the technology-heavy Nasdaq Index had fallen by nearly 7%.

Longer-term bond yields increased by about 0.4 percentage points, a sizable three-week move, which also translated to about a 5% price decline for high-quality bonds maturing beyond ten years.


December 2023 Market Recap: Old Year Wrap Up

Political polarization, bank failures, recession concerns, terrorist activity and global military conflicts were all troubling issues that weighed on the minds of investors last year. However, financial markets showed resilience, stock markets climbed, and for many investors, portfolio returns turned out to be satisfactory in 2023.

A group of technology-focused companies, commonly referred to as the Magnificent Seven – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla – had an extraordinary year, with each stock returning 49% or more. “Mag 7” returns comprised the bulk of the S&P 500 Index’s full year gain of 26%.

To put some perspective around the scale of these companies, the combined market value of the Mag 7 at the end of 2023 was greater than any other single country’s stock market.

Bond returns were less ebullient, but still positive – breaking the trend of two consecutive years of negative returns in 2021 and 2022. The Bloomberg Aggregate Bond Index, a benchmark for bond performance, returned 5.7% in 2023.

Behind the positive bond performance at year-end, there were wild swings in prices and yields throughout the year.

Market participants’ opinions on the likely path of inflation and concerns about how the Federal Reserve might respond with adjustments in short-term interest rate policy were factors behind the bond price swings.

Despite the intra-year volatility, the yield on the 10-Year Treasury note finished 2023 exactly where it started, at 3.88%. Short-term Treasury yields closed the year much higher, though, reflecting the inflation-fighting activity from the Federal Reserve, which included multiple increases in short-term interest rates.

Below is a snapshot of stock and bond returns by quarter for 2023.


November 2023 Market Recap: Talkin’ Turkey

A bird was on the table for many toward the end of the month. The financial markets plated something nice in November, too – allowing investors to talk turkey in a favorable way.

Two economic reports released in November helped stocks and bonds take flight.

At the beginning of the month, the Labor Department’s regular monthly update on the jobs market showed signs of cooling. Less demand in the labor market suggests an easing of upward pressure on wages and points to the possibility of more modest price increases for goods and services.

The October inflation report, released November 14, provided another positive catalyst for both stocks and bonds. Consumer prices rose 3.2% in the year through October, decelerating from the previous month and showing encouraging signs under the surface.

Inflation has come down meaningfully over the past year after hitting a peak in the summer of 2022. The consumer price report provided further evidence that inflation is headed in the right direction.

In November, the S&P 500 Index of large company US stocks had its highest monthly return in 2023, rising by 9.1%. Foreign stocks also participated in the celebration, with the MSCI EAFE Index rising by 8.2%. Bonds realized their best monthly gain since 1985, as the Bloomberg US Aggregate bond index returned 4.6%.

Year-to-date, US stocks gained 20.7% through the end of November, and foreign stocks have returned 12.4%. Bonds have staged a comeback and were in the black a week before Black Friday. Through the end of November bonds had returned 1.9% year-to-date.


October 2023 Market Recap: Interest Rate Specter

The unrelenting increase in Treasury bond yields and the stubborn inflation situation spooked the stock market in October. Hostilities in the Middle East and the fractious political environment in the US have also heightened investors’ concerns.

The negative financial market trends from August and September continued through most of October.

Stock returns fell again, further eroding a strong advance during the first half of 2023. The S&P 500 Index, which tracks the largest stocks in the US, slid into correction territory during the last week of the month (a decline of more than 10% from a recent peak) before ending the month on a more positive tone.

For October, the S&P 500 index of large company US stocks declined by 2.1%. Foreign stocks declined by 2.9%. Bonds took a beating last month, too: the Bloomberg US Aggregate Bond Index fell by 1.6%.

Below is a Summary of October Returns.

Year-to-date, stocks are holding onto gains. As of October 31, US stocks gained 10.6% and foreign stocks were up 3.8%. Bond returns year-to-date remain in the red: through the end of October, the major US bond market index declined by 2.6%.


September 2023 Market Recap: 3 Out of 4 Ain’t Bad

Following a punishing first nine months of 2022, stocks had been on a roll, with prices rising for three quarters in a row: Q4-2022, Q1-2023, and Q2-2023. But a swoon in August and September ended the streak.

The recent stock market decline ranged from 2% to 5% during the third quarter, depending on which index you choose to follow. To paraphrase Michael Lee Aday (aka Meat Loaf), three out of four ain’t bad.

Intermediate and long maturity bond yields climbed significantly during the quarter, with the 10-year Treasury yield reaching its highest level in sixteen years toward the end of September, at 4.6%. Higher yields translate to lower prices for bonds.

In fact, if interest rates continue to rise into the end of 2023, investors may witness something that hasn’t happened before: three consecutive calendar years of negative returns for US Treasury bonds.

The US dollar bucked the recent negative trend and reached new highs for 2023 in September. Compared to other major currencies, the US dollar appreciated by about 3% in the third quarter.

Dollar strength places additional pressure on foreign stocks, because for US-based investors, the total return of a foreign investments also incorporates changes in the value of US dollar. Foreign stocks declined by 4.9% during the third quarter.

Oil has also bucked the recent negative price trend affecting stocks and bonds. For more on developments in the oil market, see the next section.

Below is a summary of quarterly returns for stocks and bonds as of September 30.

What to make of the recent market fluctuations?

The ebb and flow of stock and bond prices (volatility) is a normal part of investing. In most calendar years, we see significant intra-year drops: for stocks, on average, the intra-year drop is about 14%, and for bonds, about 3.5%. Yet most years still end in positive territory for stocks and bonds.

A key principle of successful investing: keep market volatility in perspective. This means not just focusing on recent performance, but on your broader goals and objectives, and on the long-term investment returns of your portfolio.


August 2023 Market Recap: Summer Slump

The financial markets entered a summer slump in August.

The US government debt rating downgrade by Fitch Ratings was the initial catalyst for higher Treasury yields (and lower prices) early in the month. Minutes from the Federal Reserve’s July meeting, where interest rate policy is set, were released in mid-August and supported the narrative that central bank officials won’t be in a rush to bring rates down any time soon.

Market participants’ interpretation of the Fed’s interest rate policy kept the pressure on bond yields and hurt returns.

For August, the Bloomberg US Aggregate Bond Index fell by 0.63%. Through the end of August, the US bond market return year-to-date was still positive at 1.6%.

Higher bond yields took some of the summer heat out of stocks. For the month of August, the S&P 500 index of large company US stocks fell by 1.63%. Foreign stocks sold off by 3.9%.

Year-to-date, though, stocks are still significantly in the black. US stocks gained 18.7% and foreign stocks were up by 10.9% as of August 31.

Below is a summary of August returns.


July 2023 Market Recap: Stocks Heat Up

Stock market heat stayed high in July. Better-than-expected economic growth, declining inflation, and receding recession fears were supportive of the “new bull” which began last month.

For the month of July, the S&P 500 index of large company US stocks rose by 3.3%. Foreign stocks climbed by 2.7%. Year-to-date as of July 31, US stocks gained 20.6% and foreign stocks were up by 12.6%

However, stronger-than-expected economic growth, along with the possibility of interest rates needing to stay higher for longer to cool inflation, put downward pressure on the bond markets.

The Bloomberg US Aggregate Bond Index fell slightly last month (less than 0.1%). Through the end of July, the bond market return year-to-date was 2.25%.

Below is a summary of July returns.