“Good investors gather information, put that information into current and historical context, then make sound decisions.”
One of the greatest success stories of the decade is unfolding this year. This story is about the rapid development, adoption, and deployment of AI, or artificial intelligence. It had an enormous impact on one company in particular, which saw the demand explode for their new AI-friendly computer chips. NVIDIA’s profits, stock price, and prospects have placed it several lengths ahead of the rest of the field. It is now the largest capitalized company in the world. This culminated in the month of June, when NVIDIA’s market capitalization, which had already surpassed those of Microsoft and Apple, became the first company to eclipse $3 trillion. It has been a phenomenal development.
This has been good for the technology industry in general. Specifically, the information technology sector was the top performer in June. The S&P Information Technology Index is up +9.54% MTD, and up +28.31% YTD. Not far behind is the S&P Telecommunication Services Index, +5.55% MTD, and +27.00% YTD. These have benefited the tech-heavy indexes such as the S&P 500 Index, up +3.90% MTD, and up +15.64 YTD. The NASDAQ Composite Index is up +6.46% MTD, and +19.05% YTD. Other positive performances in June include the S&P Consumer Discretionary Index, up +4.42% MTD, and +5.74% YTD, and the S&P Biotechnology Index, up +3.64% MTD, and +3.32% YTD.
June has been much softer for the rest of the field, as they continue to jockey into position. The S&P 500 Equal Weighted Index is down -0.65% MTD, and up +4.87% YTD. The S&P 400 Mid Cap Index is -2.23% MTD, and up +5.47% YTD. The S&P 600 Small Cap Index is down -3.63% MTD, and down -2.10% YTD. The S&P Financials Index is down -1.21% MTD, and up +8.92% YTD. The S&P Energy Index is down -2.37% MTD, and up +9.92% YTD, and the S&P Industrials Index is down -1.46% MTD, and up +7.26% YTD. These numbers are quite muted relative to the technology sector results.
International equity markets are also a developing story in 2024. For several years they have been the ‘caboose’ as they followed U.S. markets in direction, but consistently failed to be as productive. While they are also performing in the shadow of the U.S. technology sector, broader improvement is evident. The MSCI EAFE Index is down -1.43% MTD, but up +5.54% YTD, and the MSCI Europe Index is down -1.92% MTD, but up +6.16% YTD. The MSCI Emerging Markets Index is up +3.84% MTD and up +7.38% YTD. International equities may be considered a ‘safe haven’ as we approach the second half of the year, away from the Federal Reserve’s interest rate decisions and the November elections.
Bond markets continue to labor under the Federal Reserve’s decision/indecision on interest rates. That being said, bonds have been stronger in June, in contrast to the equity markets’ general weakness. The Bloomberg U.S. Aggregate Bond Index is up +1.22% MTD, but still down -0.44% YTD. The Bloomberg Municipal Bond Index is up +1.51% MTD, and down -0.43% YTD. The Bloomberg US Corporate High Yield Bond Index is up +0.89% MTD, and up +2.53% YTD. These are total return numbers which include earned interest.
One of the positive features of this equity market rally has been the breadth of the advance. A broad market advance is more difficult to disrupt and less vulnerable to surprises. But even broadly advancing markets take a break, and this often occurs during the summer months. Equity markets appear to be settling into a trading range, which is a healthy way of consolidating gains without sacrificing the momentum of the long-term bull market we continue to enjoy. The first half of 2024 has been a runaway victory for AI and NVIDIA. We’ll see who else emerges as the field comes around the backstretch into the third quarter of the year.
Edward D. Foy, Manager, SELECTOR® Money Management, Chief Investment Officer, Foy Financial Services, Inc.
© 2024 Edward D. Foy. [email protected], www.foyfinancial.com.
Sources: StockCharts, Morningstar, Stock Trader’s Almanac.