The U.S. stock market went up in the first half of 2024. By the end of June, the S&P 500 had gained more than 10% and was close to its all-time high.
The S&P 500 SPX fell slightly on Friday, ending the day at 5,460.48, which is only 0.5% below its record high on June 18. The index has gained 14.5% so far this year, mostly due to rising Big Tech stocks. This is an incredibly strong performance for the first half of the year, showing that the U.S. economy is still growing even though there are signs that it might be slowing down.
A few weeks ago, Mike Skordeles, head of U.S. economics at Truist, said, “People have been beating the recession drum for two-and-a-half to three years.” He said that the U.S. economy is “cooling but not weak” this year and that the latest data shows that inflation is going down.
It has been the Federal Reserve’s goal to slow down the economy so that inflation can stay below 2% without starting a recession. For May, the Fed’s preferred gauge gave a reading that was in line with what Wall Street expected.
The Personal Consumption Expenditures Price Index showed that U.S. inflation was flat in May, and the year-over-year rate slowed to 2.6%, according to a report released by the Bureau of Economic Analysis on Friday. If you take out the prices of food and energy, core inflation went up by 0.1% last month, but it has gone down to 2.6% over the past year.
According to Kevin Gordon, a senior investment strategist at Charles Schwab, the latest data continue to “dispel the notion” that the rise in inflation seen in the first quarter would “stay the same.” Gordon said this in a phone interview on Friday. He said, “It’s reversing some of that,” meaning that inflation seems to be back on track to ease toward 2%.
Also, the fact that consumer spending was revised lower in the first quarter U.S. GDP report, which came out on June 27, is “consistent with more downward pressure on inflation,” he said. Even though inflation is still “biting for the lower-income consumer,” Gordon said that U.S. consumers have been “resilient” as a whole because the job market has been stable and the unemployment rate is still low.
Skordeles of Truist said that he thinks the U.S. economy will grow by about 2% in 2024.
The S&P 500’s rise in 2024 has been driven by a small group of Big Tech stocks. For example, shares of Nvidia Corp. NVDA, -0.36%, a company that makes chips for AI, have gone up 149.5% so far this year. This year, other big names in the widely watched stock market index, like Meta Platforms Inc. (META, -2.95%), parent company of Facebook; Alphabet Inc. (GOOG, -1.76%); parent company of Google; Amazon.com Inc. (AMZN, -2.32%); and Microsoft Corp. (MSFT, -1.30%), have also posted huge gains.
According to Dow Jones Market Data, the S&P 500 has been going up for three quarters in a row. It has risen 32.6% since its 52-week low in late October.
But Gordon said that the first half of 2024 has been “a tale of two markets” when comparing the biggest drop for the top-heavy S&P 500 index to the much bigger average drop seen among members. “Under the surface, there’s been a lot more moving around and weakness,” he said. “But it’s been hidden by a lot of these megacap names” that have done very well in 2024.
Still, Gordon says that about two-thirds of the S&P 500 have consistently traded above their 200-day moving average this year.
He said that there have been “rolling corrections” in the S&P 500 stocks in 2024, but they have not been strong enough to bring down the whole index.
