When the year began, analysts were tripping over themselves to predict a market slowdown from 2023's strong pace, with the consensus seeing the S&P 500 gaining only 8% to 9% for all of 2024.

So far, bad prediction – at least at the index level. With the first 6 months of 2024 under its belt, the S&P 500 is up 14% and change; the NASDAQ up a little further.
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But pull back the covers a bit, and the analysts are not that far off the mark. For example, the S&P 500 equal-weight index is up a more modest 3.82% for the year. What’s that, and why does it matter?  

Wall Street is on track to end May's trading month on a strong note. Softer inflation data earlier this month and better-than-expected quarterly earnings reports lifted investor sentiment and helped erase much of April’s ugliness.
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Of special note: Nvidia’s quarterly earnings, reported after the close on May 22. Investors had been on pins and needles in the days leading up to the report.

​Nvidia – the company spearheading the AI boom - has become the 800-pound gorilla of the market. 

Remember way back when (last month, to be exact) I mentioned that April is - statistically - the best month of the year on average for S&P 500 returns?

Well, not this time.
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Stocks are headed for their first losing month since October. The 30-stock Dow Jones Industrial Average is on pace for a more than 5% loss in April. The S&P 500 and Nasdaq Composite are headed for declines of more than 4% each.

Half the talk on Wall Street is about how the S&P 500 is up five straight months. The other half revolves around the question: when is the correction coming?

Since October of 2023, stocks have climbed the wall of worry and closed each month in the green. Blinders on, the market has managed to ignore vacillating inflation numbers, threats of recession, Fed speak, Fed silence, and the tea leaves of corporate earnings.

Most recently, advances were fueled by the Fed's latest remarks that maintained the central bank’s rate-cutting timeline for the year, as well as investors' ongoing enthusiasm for tech stocks amid the AI-powered rally. Overall investor sentiment remains above its historical average, reflecting persistent market optimism.

Pundits, analysts and investors had spent the first half of February flailing their arms over the most recent Consumer Price Index (CPI) and retail sales reports that showed prices growing faster than expected in January, walking back expectations for Federal Reserve rate cuts.

​[Goldman Sachs economists have dropped expectations for Federal Reserve interest rate cuts in 2024 to four from five previously, with the first reduction not coming until June.]

A slew of generally good corporate earnings reports kept hope alive, but in fits and starts. Amazon and Meta, for example, beating expectations. But Apple reporting weakness in the Chinese market. Talk of a market rally running out of steam became pervasive on the business channels. 

January gave a gentle push to the popular indices. Despite today’s selloff, at the close the S&P 500 and the Nasdaq-100 are up +1.60% and +1.82% respectively to begin the year.

Of course, to get a more complete picture, it’s helpful to look at some other data – for example, the S&P 500 equal weight index. It’s actually down -0.87% for the year. ​

​That signals to me the “Magnificent Seven” [Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla] continues to throw its weight around disproportionally, accounting for the vast majority of the strength in the market.
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In addition to marking the start of the year, January saw a few additional beginnings worth noting:

Santa delivered. So did the Fed.

I can’t speak for Santa, but Fed Chair Jerome Powell had this to say mid-month after the latest Fed policy meeting. “I think it’s really good to see the progress that we’re making. If you look at the ... six-month measures, you see very low numbers.”
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That’s right, what you read was optimism. That tone, coupled with rate-cut projections for 2024 and whatever contribution Santa made, sent the market soaring. 

The Nasdaq is now on pace for its best year since 1999. Well and good. But if you zoom out just a little bit and look at the performance of the index over the past two years, you’ll see quite a different story. 

Old joke. Why did God create economists? To make weather forecasters look good.
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A little over a year ago, the Wall Street Journal’s Economic Forecasting Survey, an annual event tapping the brainpower of over sixty academic, business and financial economists, looked into the near-term future and saw nothing but trouble.

• GDP would shrink in the first half of the year (2023).
• Job growth would turn negative.
• A recession was baked in.
• A ‘soft landing’? Forget about it. It was a mythical creature.

 
​All this in response to the Fed’s fight to bring down inflation. Looking back, you couldn’t blame them for their negativity. ​

It has been a dismal October with Treasury yields surging to multiyear highs and the S&P 500 benchmark set to close out its third-straight negative month. The tech-heavy Nasdaq has declined more than 3% month to date, and is also on pace for its third negative month in a row.
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The “Magnificent Seven” used to refer to the 1960 Western film featuring Yul Brynner, Steve McQueen, Charles Bronson, and 4 other leading men of the day.

​But stock market investors in 2023 recognize the term as the set of seven big tech stocks, namely Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla. It so happens they occupy the top spots in the S&P 500 index, as well as the Nasdaq. 

September is poised to deliver the S&P 500’s worst monthly performance of 2023 -- a 5% drop.

​The Nasdaq Composite is down 6.5% with big-cap tech names taking it on the chin (Apple down 10%, Nvidia – darling of AI – down 11%, Netflix down 14%). Even the stalwarts of the Dow Jones Industrial Average are down a collective 3.4%
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Hedges have been hard to come by: the long-duration bond fund TLT lost almost 7% for the month; the gold fund GLD clipped for 4%. One bright spot -- the U.S. Dollar.