Second Quarter 2024 Review & Outlook

“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” – Warren Buffett


The stock market continued its upward momentum during the second quarter while continuing to set many all-time highs. The Dow Jones Industrial Average (DJIA) was up 4.8%, the S&P 500 was up 15.3%, and the NASDAQ Composite was up 18.6% during the first six months of the year. The S&P 500 was up 4.3% during the second quarter, which followed strong gains of 10.6% last quarter and 11.7% in the fourth quarter of 2023. During the first six months of the year the best performing sectors were technology, communication services, energy, and financials. As can be seen in the disparity of the broad market indexes, the major market drivers have come more from the growth-oriented stocks (NASDAQ) and less from the value stocks (DJIA).

Several companies have accounted for a large part of the gain in the S&P 500 this year. NVIDIA alone has contributed approximately 30% of the total return for the S&P 500 according to S&P Dow Jones Indices. If you include the returns from Apple, Alphabet (Google), Amazon, Broadcom, Meta Platforms (Facebook), and Microsoft, those seven companies have accounted for more than two thirds of the return for the S&P 500 in 2024. According to the Wall Street Journal, “Within the S&P 500, companies related to Artificial Intelligence (AI) gained 14.7% in market value during the second quarter, whereas the rest lost 1.2%.” A typical investor has likely needed to have exposure to the large leading technology stocks in order to achieve returns close to the S&P 500 market average.

When the year started many market pundits predicted the Federal Reserve would lower interest rates six times during 2024. However, inflation has continued to persist at a high enough level to prevent the Federal Reserve from lowering interest rates. Elevated inflation, along with reasonably strong economic growth, has pushed the interest rate for the 10-year U.S. Treasury note from 3.86% at the end of last year to 4.34% at the end of the second quarter. This marks the second straight quarter and eight of the last ten quarters that bond yields have increased. The rise in interest rates has slowed the housing market due to a typical 30-year mortgage rate in excess of 7%, while consumer discretionary spending has also softened this year.

A positive development is the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index, rose only 2.6% in May from a year ago, a sign that price pressures continue to moderate. Traders are now pricing in roughly a 95% chance that the Fed will cut rates at least once this year according to the CME Group’s FedWatch tool after the release of the PCE inflation number in late June. The first 0.25% rate cut is projected to happen at the Fed’s September meeting.

Despite declining inflation readings, the consumer has started pulling back on various purchases in the economy. Campbell Soup, owner of Pepperidge Farm and other snack brands, recently lowered its sales forecast because it said consumers are switching to private label alternatives. This is likely due to the consumer feeling pinched because of the compounding effects of inflation over the last several years. The Wall Street Journal stated, “Consumers are taking little comfort from milder annual inflation rates because the run-up in the price of everything from housing to groceries to cars since 2021 has been unusually large. Over the last four years, prices are up 22% in the Consumer Price Index, compared with 7% in the four years before that.”

Many consumer goods and restaurant companies, such as Starbucks, McDonald’s, and Kraft Heinz, which raised prices over the last several years are reporting greater resistance to further price increases. In a recent survey of U.S. consumers by Jefferies, some 51% of respondents said they are buying more private-label products to save money on grocery bills. The Labor Department reported that grocery prices in April were about 26% higher than five years ago in 2019. Joe Erlinger, president of McDonald’s US, recently stated in an interview that their prices have increased by an average of 40% since 2019 to offset rising costs. 

Home ownership costs continue to increase as well. Non-mortgage costs including property taxes, maintenance, utilities, and insurance make up more than half of homeowners’ overall costs, according to a 2022 analysis by Fannie Mae economists. Nearly one in five homeowners said they couldn’t afford a $500 emergency repair without going into credit card debt according to a February online survey of 1,000 homeowners by tech company, Clever Real Estate, while 42% said they’ve skipped home repairs or maintenance because of the cost. Some interesting statistics regarding home ownership are as follows:

  • The average annual cost to maintain a home in the fourth quarter of 2023 was $6,663, up 8.3% from a year earlier, according to home-improvement tech company Thumbtack.
  • The average property tax for a U.S. single family home was $4,062 in 2023, up 4.1% from 2022, according to real-estate data firm Attom.
  • The average annual home insurance cost rose about 20% between 2021 and 2023 to $2,377, according to insurance-shopping site Insurify, which projects another 6% increase in 2024.


In the fourth quarter of 2023, wealth held in stocks, real estate, and other assets such as pensions reached the highest level ever observed by the Federal Reserve. A significant part of economic activity is now likely driven more by wealth and higher incomes than by access to credit given the high current borrowing rates. The pandemic changed people’s spending habits, which along with higher asset prices, a solid job market and government stimulus checks, left many households with healthy balance sheets to continue spending in our economy. While inflation and higher interest rates have been an economic headwind, one benefit of higher interest rates is the income earned by depositors. According to the Commerce Department, Americans in the first quarter earned about $3.7 trillion from interest and dividends at a seasonally adjusted annual rate which is up $770 billion from four years ago.

Analysts expect profits from companies in the S&P 500 to grow 11% this year, with all of the sectors except for energy and materials showing projected earnings increases, according to FactSet. Beyond this year, analysts anticipate earnings will rise 14% in 2025. If we look at the near-term expectations for second quarter earnings, UBS Investment Bank US equity strategist Jonathan Golub projects Nvidia, Apple, Alphabet, Microsoft, Amazon, and Meta to grow earnings by a combined 31.7% in the second quarter, as compared to a 7.8% advance by the entire S&P 500. This is evidence of the impact of large technology stocks on the overall market.

Despite the strong market, investors should be reminded to expect some type of market correction. A 5-10% market decline tends to happen annually on average. Recently, many of the talking heads on financial news networks gave plenty of coverage to NVIDIAs over 10% stock price decline in mid-June. It has since recovered nearly half of that decline, but it serves as a reminder on how volatile individual stocks can be. We believe a modest market correction would serve as a good buying opportunity for long-term investors.

Several different major financial firms are projecting gains to continue for the rest of 2024:

  • CFRA remains positive on the stock market for the next six months. “We continue to project a second-half price increase in the S&P 500, driven by ongoing economic advances, the avoidance of recession, upwardly revised 2024 and 2025 EPS estimates, declining year-over-year inflation readings, and the likelihood of at least one rate cut by year-end.”
  • Julian Emanuel from Evercore ISI recently raised his year-end forecast for the S&P 500 from 4,750 to 6,000. This new level would be a gain of approximately 10% from the end of quarter level. He cited healthy company fundamentals underlying the equity market as one catalyst for the bullish outlook.
  • Goldman Sachs Chief U.S. Equity Strategist David Kostin increased his year-end S&P 500 price target due to corporate earnings continuing to strengthen.

As we stated in our previous quarterly letter, good years typically follow great years in the stock market, like we had in 2023. This year has thus far followed that pattern, with CFRA recently noting the following, “20%+ annual price gains in the S&P 500 were followed by a 10% average annual increase. In addition, every election year since WWII that started with a January gain posted a positive full-year return averaging 15.6%. These axioms have held true so far and imply a positive second half. Since WWII, whenever the first-half increase exceeded the median advance of 4%, the S&P 500 gained an additional 5.5% in the second half and rose in price 89% of the time. While certainly no guarantee, these historical lookbacks encourage investors to stay the course.”

We believe the market will likely continue to move higher barring an unforeseen negative economic development. Barron’s summed it up well when it stated, “Monthly data on jobs, inflation, and economic activity will move the market in the months ahead, and could inject more volatility. Election uncertainty will become more front of mind as November approaches and could be another source of turbulence. But absent a data shock that materially changes the Fed’s calculus, the stock market probably will sail through the noise.”

Please let us know if you have any questions or if you would like to discuss your financial situation in detail. Thank you for being clients of our firm.


Marietta Wealth Management, LLC

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