July 1st has come and gone. Now that we’ve started the back half of 2024, it’s time for a brief update on where we are in the money world. Let’s try to take a look at some important things that have happened and are currently happening. I’ll do my best to summarize the more impactful things.
1. There’s a presidential election going on. I’m not going to spend any time discussing it, as we learned from a previous article, the presidential election and the person sitting in office seem to have very limited effect on the investment marketplace.
2. Inflation is lower, but still a little choppy. The Federal Reserve’s target for the right amount of inflation is 2%. For the most part, inflation has receded rapidly, however once it hit the 3% range it seems to have plateaued a bit. In short, inflation is a lot better, but there’s still some work to do.
3. Higher interest rates have persisted longer than we thought, and that’s not necessarily a bad thing. In response to inflation remaining a bit high, the Fed has left rates elevated. The thought was that we might enter a recession, which would probably curb inflation, and force the Federal Reserve to cut rates. The economy seems to be mostly holding up well, even under the burden of higher interest rates.
4. The AI boom continues to drive the stock market higher. Companies that have business in the artificial intelligence space lead the market, causing a rather large disconnect. The overall stock market indexes have hit record highs, however many of the stocks in those indices have not participated. It’s been exactly the opposite of a “rising tide lifts all boats”.
5. The market is at record highs. The S&P 500 continues to hit new records. It is also soundly beating its cousin, the Dow Jones Industrial Average. In the last 12 months, the S&P 500 is up 28%
and the Dow is up 18% (CNBC, 2024). The Dow doesn’t include as many stocks that are part of the artificial intelligence supercycle.
6. NVIDIA is the new gorilla in the market. The chipmaker has entered a battle with Microsoft and Apple as the world’s most valuable company. As of July 11th Apple was worth $3.5 trillion, Microsoft was worth $3.4 trillion, and NVIDIA was worth $3.2 trillion. (none, 2024) Just to show you how truly massive these companies are by their value, the total world stock market value is $109 trillion.
The second half of the year poses some interesting questions. Will the AI supercycle continue? Will the rest of the companies in the market catch up to those involved in artificial intelligence? Will interest rates stay at these levels for much longer? Will inflation finally break down to the target set by the Fed?
Let’s hope the economy stays strong and markets respond accordingly.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.