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Market Commentary
June 10, 2024
In May, the S&P 500 Index recouped its April losses on AI enthusiasm and equity investors’ hope that the “Fed put” might be back in play. Led by electronic technology and bond proxies (utilities, telecom, and real estate), ten of the eleven GICS sectors in the S&P 500 generated positive total returns in May. Still, only 33 percent of constituents outperformed the overall benchmark. Nvidia, Apple, Microsoft, Meta, and Alphabet contributed about 60 percent to the S&P 500 Index’s and 83 percent to the Russell 1000 Growth Index’s one-month returns of +4.96 percent and +5.99 percent, respectively.
The S&P 500 Index’s forward price-to-earnings multiple appears to discount a more aggressive interest rate cut scenario than implied by fed funds futures or U.S. Treasuries. However, a further pushout in rate cuts is a risk for broad stock market returns. Meanwhile, expectations for a soft/no landing, upward earnings revisions, a surplus of legacy liquidity, and the fear of missing out continue to provide an underlying bid for domestic stocks.
With the S&P 500 Index again at a record high, broad stock market indices are poised to trade sideways on higher volatility as economic headwinds, monetary policy uncertainty, and the impacts of the U.S. elections give investors pause. Nonetheless, the correction in software stocks has provided attractive investment opportunities, as valuations more than discount a modest slowdown in enterprise spending. Moreover, “higher for longer” interest rates are an earnings tailwind for financials.
For our latest full Global Investment Outlook & Strategy Update, download the .pdf document.
2024 Seminars
Sit Mutual Funds will be offering three different investment seminars this summer. For content and date information please visit the 2024 Seminars page.