June Commentary

After a tough April (down 4.2% on the S&P 500), markets had a huge recovery in May. The S&P 500 rose 4.8% in the month. As of the end of May, the S&P 500 is up just over 10%. The main thing to highlight here is how quickly things snapped back. We barely had time to digest the April decline before the S&P 500 was back to flirting with new highs.

Bond rates declined for the first half of June but were relatively unchanged for the month overall. We did see a broadening of stocks participating in the rally in May, including small cap stocks and value stocks. 

Economic data has been a touch softer (job gains slowed significantly in April), and inflation has seemed stickier (the Consumer Price Index, or CPI, remains around 3.5%). Economic growth has generally slowed in 2024 from the high growth we saw in 2023, but it remains positive, and unemployment remains at historic lows. 

Because of the mixed signals in economic data, Wall Street seems to be obsessed with trying to guess the Federal Reserve’s next move. Traders expected numerous cuts in 2024 at the beginning of the year, but now anticipate only one cut. At GRWP, we don’t find it very useful to guess the Federal Reserve’s next move. Instead of trying to guess the next move, we think it is more beneficial to focus on the core items at hand.

The main driver this year continues to be the excitement around Artificial Intelligence (AI). Commentators are starting to make comparisons between AI and the mania that surrounded the internet in the 1990s. While we might not agree, it is fair to consider this concept and give a moment of pause. As we look back at all the promises that were made in the early days of the internet, we must acknowledge that many of them have been fulfilled. But during that same period, we saw the crash of 2000, the financial crisis in 2008, and all the other memorable bumps along the way. Today, the stocks that helped usher in the internet are now some of the most profitable and successful companies of our time; and we are sure the companies that are ushering AI will enjoy the same level of success. But similar to the internet experience, this road may be bumpy.

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