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Market Commentary - June 2024

Read the Spring 2024 WAA for our Market Quicktakes, Q1 Review, and Much More

June 2024

Stocks rebound in May and set All-Time Highs

After a challenging pullback in April, which ended a 5-month winning streak, stocks rebounded sharply across the board in May. The Dow, S&P 500, Nasdaq, and MSCI World All-Cap indexes all set new All-Time Highs during the month. The storied Dow, which lagged the other indexes with a 2.3% gain in May, closed above 40,000 for the first time ever.

Stocks were strong out of the gate following the Fed’s May FOMC meeting that concluded on May 1. The Fed noted the economy has continued to “expand at a solid pace,” job gains have remained strong, and the unemployment rate has remained low, but the stickier-than-expected February and March inflation readings have not given the Fed enough confidence to cut interest rates anytime soon. However, the Fed’s statement and Powell’s comments were not as bad as expected and stocks rallied. Bonds rallied as well, and interest rates fell from recent highs in April.  

Also fueled by stronger-than-expected corporate earnings, the tech-heavy Nasdaq and S&P 500 jumped 6.9% and 4.8% respectively in May, closing the month up 11.5% and 10.6% for the year. Reflecting the broad-based gains, the small-cap Russell 2000 gained 4.9% to finish back in positive territory for the year up 2.1%, while the mid-cap S&P 400 rose 4.3% and finished +7.2% YTD.

Overseas, developed market stocks had strong gains as well with the benchmark MSCI EAFE index rising  3.3%, while Emerging Markets edged higher by 0.3%. The ECB is expected to cut rates in June.

Economic data was mixed in May, yet the soft-landing narrative remained firmly in place. While Q1 GDP was revised down to 1.3% annually and April job gains were below expectations at +175,000, flash PMI manufacturing and services were both 50+ and unemployment remained near 50-year lows at 3.9%. Inflation readings, which have been sticky since February, were encouraging with April CPI at 3.4% and PCE at 2.8% showing some improvement from March and lending support to potential Fed rate cuts later this year.

As noted earlier, the Fed held interest rates steady, as expected, at its May FOMC meeting. Though interest rate cuts were not likely in the near-term, Chair Powell pushed back against any rate hikes. The bond market liked that news and interest rates dipped across the yield curve in May, softening the sharp increases in April. The benchmark Bloomberg Aggregate Bond Index gained 1.8% in May, cutting its loss for the year to -1.7%. The 10-year Treasury Note yield declined 0.18% to close at 4.51%.

As we noted last month, pullbacks, consolidations, and corrections are normal for the market every year. This is part of the market process for long-term investors. April was yet another example and patient investors were rewarded in May.

While the summer months for the market are often described as the “summer doldrums,” volatility remains in the forecast as the market continues to discount prospects for Fed rate cuts amid new economic data.

June Update

Stocks have been mixed to start June. Large-caps added to their May gains with the Nasdaq and S&P 500 setting new record highs, while small- and mid-caps have dipped. A stronger-than-expected jobs report for May released on Friday, June 7th, which showed 275,000 new jobs and average hourly earnings rising 4.1% over the past 12 months, caused interest rates to rise sharply from recent lows and threw some cold water on Fed interest rate cuts happening anytime soon. The unemployment rate edged higher to 4.0%. but has remained 4.0% or lower since December 2021. Unemployment hit 14.8% at its Covid-19 peak in April 2020.

Overseas, developed and emerging market stocks have risen to start June. The ECB cut interest rates as expected June 6, and for the first time since 2019. The ECB has not hit its inflation target prior to cutting interest rates, which leaves the door open for the Fed. The ECB joined the Bank of Canada, which also cut interest rates last week, as well as Switzerland and Sweden which cut rates earlier this year. The ECB has not hit its inflation target prior to cutting interest rates, which leaves the door open for the Fed.

The Fed FOMC meets again June 11-12; while no change in interest rate policy is expected, the statement and Chair Powell's press conference following will be carefully parsed by the markets for any future guidance.

We continue to encourage investors:

  • Remain well-diversified
  • Maintain discipline and patience
  • Focus on the long-term
  • Review your Risk Tolerance

Call your Nelson Advisor today at 800-345-7593 to discuss any concerns and review your portfolio.