July 2024 -Further Gains On The Horizon?

We hope you and your family are having a great start to your summer and had an enjoyable 4th of July yesterday.

The first half of 2024 has been nothing short of fantastic (as we knock on wood). As of market close on Wednesday afternoon July 3rd, the Dow 30, the S&P 500 and the NASDAQ Indices have returned a positive 4.18%, 16.20% and 21.28% respectively with the Dow 30 Index being the laggard -highlighting once again the divergence of performance between value and growth orientated stocks year to date and a continuation from 2023.

Bond performance has been mediocre year to date with the Barclays U.S. Aggregate Bond Index returning -0.71% (this is to be expected in our current economic environment) but, bonds are doing their job within portfolios by providing current income in the form of coupon payments and act as a ballast to our equity allocations.

As a reminder, we purchase individual bonds (at PAR or as close as we can get), ladder out maturities, and often lock in above average coupon interest rates. Buying individual bonds, as opposed to bond funds or bond ETFs, allows us to hold each bond to maturity or to call, collect the income along the way and receive our original invested amount back upon maturity to reinvest.

Remember, Interest rates and bond prices have an inverse relationship. Looking ahead, we’re highly certain the next move by the Federal Reserve will be a series of interest rate cuts and this should boost bond prices over time and could lead to out-performance from our fixed income holdings on top of coupon payments.

So, what might the second half of 2024 have in store for stocks? If history is our guide, then more gains are certainly possible, as strong first halves have historically been followed by above-average second half returns of about 6.0%. When first-half gains were 10% or greater (this year) the S&P 500 index averaged a 7.7% advance in the second half. If this scenario does play out, we could be looking at 23%+ returns for 2024-year end.

Late next week, corporations are set to report 2nd quarter earnings and we’re expecting double-digit earnings growth, which should offer near-term support for stock prices — particularly Ai beneficiaries -which our portfolios have been well positioned for years to reap the benefits of this new industrial revolution. As we have mentioned before, stock prices tend to move on sentiment over short periods of time, but long-term gains are achieved by growing earnings per share year over year.

However, as we know, market gains are not linear, and minor pullbacks (what we experienced in April) or a 10% correction should be expected in the second half. Political and geopolitical risks are rising, the Ai trade could fizzle, and Inflation data has cooperated of late, but that could reverse at any time.

As we have mentioned before, tactically, given portfolio gains, if you foresee yourself needing a material withdraw from your portfolio ($20k+) by year end, please reach out to us. Raising cash now during market highs is optimal.

 

As always, we wish you and your family a great Friday evening, and a wonderful weekend!

Please reach out to us with any questions or comments you may have regarding your specific situation.

 

Jaran C. Day, Chief Investment Officer

 

Griffin Dalrymple, CFP®, Chief Strategy Officer

LET’S BEGIN WITH A
CONVERSATION