Markets Rally in June

Markets Rally in June

Markets Rally in June

Highlights

  • Disinflation Trend Continues: June readings on inflation came in lower than expected, giving us two consecutive months of lower year-over-year readings.
  • Equity Markets Advanced in June: The S&P 500 was higher by 4% in June and is higher by 15% so far this year.
  • Labor Markets Slightly Cooling: Jobless claims and the job openings to job seekers ratio are showing some slack building in the labor markets. We believe this is a cooling of a previously overheated labor market, but we’ll continue to monitor for anything deeper.
  • Fixed Income Market Rally: Yields fell in June and are down 55bps since the recent peak in yields during April.
  • Data Driven Fed Leads to Data Driven Markets: Equity and fixed income markets continued to move on how each data point will impact the Fed’s decision-making in June.
  • Outlook Largely Intact: Although data has been mixed so far in 2024, our outlook on the key themes driving equity and fixed income markets remain intact.

Equity Markets

June was another impressive month for equity returns, with the S&P 500 rising by nearly 4.0% to close near a record high of 5,460. This continued the strong run so far this year, with the index gaining 15% in the first half. The rally in June came as softer economic and inflation data further supported the potential for rate cuts by the Federal Reserve and solid corporate earnings pushed investors to continue buying stocks. 

Moving to sector returns, the two biggest gainers in June were information technology (+9%) and communication services (+6%) as the remarkable run of artificial intelligence related names
continued on the back of strong earnings releases from a few of the key players in the
space. In fact both sectors are now up more than 28% for the year and have accounted for two-thirds of the total return for the S&P 500.

On the downside in June, utilities were the worst performing sector (-5%), giving up some of the outsized gains the sector realized in May. The other two detractors were materials (-3%) and energy (-2%). For the year, real estate is the lone negative sector (-3%) as concerns continue about valuations in certain pockets of commercial and office properties.

Last month we discussed the large (and continued) divergence between the S&P 500 and a few other large cap indices that weren’t as technology sensitive. Another divergence that we’ve seen is between large and small capitalization companies. As mentioned above, the S&P 500 has gained more than 15% so far this year. Compare this to the S&P 600 Small Cap Index, which is down -1% in 2024.

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