Stocks stay quiet despite bearish signs

06/19/2024 — So far in 2024 (through Monday, June 17), the S&P 500® Index has notched an impressive 30 all-time highs. Investors have weathered a convergence of varying economic reports, hawkish commentary from the Federal Reserve, and a dramatic reset of Fed rate cut expectations, all while geopolitical tensions remained elevated.

Despite the challenges, the market has demonstrated its resilience, with only one significant pullback for the year, a cumulative decline of 5.5% in April. The market’s robust rally from the October 2023 low, a testament to its strength, has bolstered bullish sentiment, supported by U.S. economic growth at or above trend and steady improvement in corporate earnings.

Not long ago, investors expected six rate cuts from the Federal Reserve. Those hopes were dashed by stubbornly high inflation and rebounding economic growth. As the year’s first half progressed, the market paired back its expectations for rate cuts, which should have dampened investor sentiment and halted the market rally.

At its June meeting, the Federal Open Market Committee voted to keep the federal funds target rate unchanged, with the median “dot plot” now showing only one cut in 2024, down from three at the March FOMC meeting. Despite the Fed’s more hawkish tilt, the S&P 500 recorded another new all-time high. Daily fluctuations in the S&P 500 have been notably modest in 2024. Only one day so far this year has seen a move of 2% or more.

Given the lack of extreme daily price fluctuations this year, investors should have a well-crafted financial plan and maintain a long-term perspective. Remember that market volatility is a natural part of investing, and a significant pullback is unlikely if GDP and EPS revisions do not significantly decline throughout the year.