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07/01/2024 Market Strategy

  • John Stoltzfus
  • July 1, 2024

Churn, Churn, Churn

Equities and Bonds May Mark Time Until More Clarity Comes via Economic and Earnings Reports

Key Takeaways

  • Markets may enter a holding pattern as we await additional economic data and before earnings season begins when the big banks report on July 12.
  • Last week’s PCE deflator measure of inflation–the Fed’s preferred gauge–showed a slowing in inflation from the prior month. That and modest declines in consumer confidence continue a string of softer economic data as consumers seem weary and retailers trim prices as a result.
  • This week brings the nonfarm payrolls report and the ISM surveys, offering our first indications of the economy’s momentum in June. 
abstract finance

With the S&P 500 and the NASDAQ Composite starting the third quarter and the second half of the year up 14.5% and 18.1% respectively since the start of the year, stock market participants are looking for a broadening in sector, market capitalization, and style performance.

So far in 2024, technology’s dominance in share price performance has been central in leading both benchmarks higher–frustrating investors who had expected the rally from late October of last year to broaden further through the first half of this year.

Stickier than expected inflation over the course of the first half of 2024 dashed expectations among some market players that the Fed would begin cutting rates sooner than later and as early as January, March, April, and June.

Quotation from Aenean Pretium

In our view it is not uncommon in early bull markets for one or just a few sectors to gain traction and lead market performance before a broadening in performance takes hold.

While better than expected inflation data released last week garnered investor attention and raised hopes for a rate cut as early as September, the Fed in our view appears to remain wary of cutting rates too soon as well as cutting ahead of the elections.

That said, we believe the Fed may be able to avoid pushing the economy into a recession this rate hike cycle. Resilience continues to be evidenced in US economic data, corporate earnings, job postings, and in consumer activity even as the pace of economic growth slows after eleven rate hikes and eight pauses since the Fed rate hike cycle began in March of 2022.

Improved fundamentals have so far kept the bears at bay for most of this year notwithstanding several periods of modest declines in periods between key data releases and earnings results.

Where are we now?

In our view we’re near term in a holding pattern with key economic data scheduled to be released this week and with S&P 500 earnings season to get underway next week when the big banks begin to report Q2 results offering opportunity for traders and investors to find greater clarity.

Worth noting

The performance differential among the sectors of the S&P 500 since January has been so dramatic as to cause some pundits recently to question the importance of traditional diversification. We are not in that camp. In our view it is not uncommon in early bull markets for one or just a few sectors to gain traction and lead market performance before a broadening in performance takes hold.

The good news is that fundamentals in 2024 improved through the first half of the year enough to carry the US markets higher. Now the age-old question “what have you done for me lately” resounds as the “curtain rises and the second act gets underway.” We suggest that investors practice patience at this juncture and let the economy, the Fed, and innovation serve as guides.

We remain positive on equities and continue to see fixed income securities as complementary to stocks in providing portfolio diversification.

Some near term profit-taking in the day-to-day action of the market, particularly in segments of the market that have had exceptional run-ups since last year into this year, should be expected and continues to appear to us quite normal.

Such activity combined with a process of rebalancing and rotation into other segments of the stock market in our view can be healthy and should contribute to the broadening of the market’s progress in the second half of this year.

Near term volatility could in our view continue to present opportunity for investors to “catch babies that get thrown out with the bath water” in periods of market down drafts. Levels of uncertainty are not uncommon to times of transition in monetary policy like these and in periods of rising geopolitical risk.

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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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