Summer arrived early this year, as upstate New York saw temperatures approach record highs (and record-high lows) this past week. Just two weeks prior, our iconic Saratoga Race Course played host to the first-ever four-day Belmont Stakes Racing Festival. Downtown Saratoga Springs was bustling, with its shops, restaurants, and hotels at or near full capacity. What many refer to as the August “place to be” became the early June “place to be” as well. A success by all accounts, this year’s hosting of the Belmont Stakes sets the stage for 2025, as the Saratoga Race Course will again host these races while Belmont Park continues its renovations. While activity in town has since slowed down, the anticipation of another successful summer of racing at the Saratoga Race Course has already begun.
Following a very strong start to the year, the broader stock market, as measured by the S&P 500 Index, experienced a slight drop in April, before rebounding nicely in May and thus far in June. As of the close of business on June 21, the S&P 500 Index is up just over 15% year-to-date, strong returns by any measurement. The increase is also a testament to the strength of U.S. companies in the face of high interest rates and ongoing inflationary pressures. Mixed economic data, especially with respect to inflation and employment, have resulted in zero rate cuts to date. Coming into 2024, experts expected a minimum of three rate cuts, and possibly more over the course of the year. The current expectation is for the Federal Reserve to do so just once between now and year-end. Overall inflation increased 3.3% over the past 12 months and is expected to be closer to 3% by year-end, which is still well above the Fed’s target rate of 2%. The unemployment rate is currently at 4%, up from a low of 3.4% last year, but still relatively low compared to the average rate of 5.69% since 1948.
While post-Covid economic expansion has slowed, data suggests that GDP will continue to grow at a modest pace for the remainder of 2024, potentially avoiding a recession that many felt was inevitable. While first-quarter GDP slowed to just 1.3%, early estimates are for second-quarter GDP to be around 2.5%, ahead of the Fed’s estimate for long-term growth, currently at 1.8%. Consumer spending has been much stronger than anticipated, and investment spending has also proven resilient, despite higher interest rates.
The trajectory of equities continues to be higher due to better-than-anticipated first-quarter earnings and a forward-earnings projection of 11% for the year. Corporate balance sheets remain strong, and market breadth has expanded, with many more companies participating in this year’s rally compared to last year’s rally, which was mostly concentrated in just seven companies.
As we head into the second half of 2024, the presidential election will undoubtedly take center stage, with corporate earnings, interest rates, and employment being relegated to a secondary position, at least for a short period of time. While this election is anticipated to be one of our more contentious ones, history demonstrates that investment returns tend to be based on the fundamentals of our U.S. economy, its companies, and its consumers, rather than on politics.
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