Global equities marched higher during the month of June, with blue-chip technology names once again leading the way. The S&P 500 gained +3.6% on the month and is up +15% through the first half of 2024.
Smaller company stocks went the other way, falling -1% in June as the Russell 2000 index continues to underperform, up just +1.7% year-to-date.
Overseas stocks were roughly flat on the month, with the MSCI ACWI ex-US Index up +5.7% through the first six months, though we did see a +4% pop from Emerging Market stocks in June.
Bond prices also rallied, with the Bloomberg US Aggregate Bond gaining +1% in June as interest rates fell on the back of favorable inflation data. With the market growing increasingly confident in at least one Fed rate cut this fall, bond prices are down just -0.7% YTD.
Commodity prices fell slightly in June, with lower gold prices offsetting a rally in crude oil. The Bloomberg Commodity Index is up +5.1% year-to-date.
Our proprietary Three Dials readings remain unchanged through the end of the second quarter, as we outline below:
- Market Sentiment and Momentum: (Positive ➕)
While overall equity momentum remains strong, we’re seeing narrowing breadth exemplified by the tech-heavy NASDAQ gaining +17% so far in 2024 while the old-economy Dow Jones Industrial Average is up just +5%.
We’ll want to see more broad-based gains if this current bull market is going to have sustained legs, but for now our Momentum Dial remains Positive.
- Economic Fundamentals: (Negative ❌)
We’re continuing to see higher interest rates and depleted savings weigh on broad economic activity, with Walgreens the most recent company to announce significant store closures due to falling consumer spending.
While the global economy continues to muddle through this period, the risks of a future downturn leave our Fundamental Dial in a Negative position.
- Valuation: (Negative ❌)
Valuations were roughly unchanged during the month of June, with gains in the S&P driven by projected earnings growth of +9% for Q2.
While lower interest rates should help relieve pressure on stocks, P/E ratios still sit near the high end of their historical range, which leaves our Valuation Dial in a Negative position through June.
Our composite Three Dials reading remains in a Moderately Defensive position through the end of Q2, with two dials Negative and one dial Positive.
Sources: Morningstar
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