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2Q24 Quarterly Recap

Quarterly Recap

 Market Indices

At-A-Glance

  • The S&P 500 finished June at 5,460, just 0.48% below its 31st all-time high of the year set on June 18. The S&P 500 is up 37.18% from its October 2023 low and capped its third straight quarterly gain.
  • The Dow Industrials rose 1.23% in June, trimming its second quarter loss to 1.27%. The Dow-30 Index is up 4.79% YTD, having reached a new record high on May 16, closing above 40,000 for the first time.
  • The Nasdaq Composite gained 6.03% in June and 8.47% in the second quarter, capping a YTD gain of 18.57%.
  • Foreign equities widely trailed the U.S. on a YTD basis. Yet in June, Emerging Markets (+5%) outperformed, surpassing S&P 500 performance by 0.72%. Internationally, the MSCI EAFE Index ended negative in June and the second quarter, capping a 7.49% gain for the first half of 2024.
  • The Bloomberg Commodity Index fell 1.54% in June, trimming its second quarter gain to 2.89%. Commodities are up 5.14% YTD.
  • S&P GSCI Gold rose 4.93% in the quarter extending its YTD gain to 12.66%. S&P GSCI Crude Oil gained 1.28%, extending its YTD advance to 19.79%.

Second Quarter 2024

The S&P 500 ended the second quarter with a technology-driven rally that spurred a 15.29% return during the first half of the year, its sixth best two-quarter start to a year since 1990. Moreover, the near 15.3% performance is the second strongest election year start since 1944. Unusually, however, only a handful of Big Tech company stocks have fueled this year’s rally. Despite a sell-off at the end of June, the primary bellwether artificial intelligence (AI) chipmaker dominated the two-quarter tech rally, up nearly 150% year-to-date (YTD). Four other so-called Magnificent Seven stocks also eclipsed the S&P 500’s first half performance. All three major U.S. equity indices advanced in June, posting their seventh positive monthly performance in eight months.

Additional catalysts behind the sustained broad market rally include further easing in consumer inflation. The most current personal-consumption expenditures (PCE) price index was flat in May for the first time in six months and its year-over-year measure came in at 2.6%, down from 2.7% the month prior. The Fed’s preferred inflation gauge, the core PCE price index that excludes food and energy, rose just 0.1% in May while its annualized rate declined from 2.8% to a 38-month low of 2.6%.

In other key data, U.S. real GDP growth slowed to an annual pace of 1.4% in the first quarter, up slightly from 1.3% previously estimated but is considerably lower than 3.4% economic growth in the fourth quarter 2023. San Franciso Fed President Daly said May’s inflation data suggests that the central bank’s monetary policy is working to control inflation and cool the economy. She, however, noted that it remains too soon to determine whether reducing interest rates is appropriate.

Recovering corporate earnings are also helping boost investor sentiment. After earnings on S&P 500 companies increased at a 5.5% year-over-year (YOY) pace in the first quarter to exceed initial estimates for 3.1%, S&P Capital IQ is forecasting second quarter 2024 earnings per share (EPS) to grow by 8.2% YoY. Estimates now also point to 9.2 EPS growth for all of 2024, followed by a 14.6% increase in 2025.

Financials got a boost towards the end of the quarter after all of the 31 largest U.S. banks passed their annual “stress tests”, satisfying federal regulators that the systemically important banks could withstand a jump in the unemployment rate to 10% during a severe hypothetical recession.

As shown in the style box performance boxes below, large cap Growth and large cap Blend led gains in all three time periods. Likewise small and mid cap Value and Blend ended negative or gained the least.


Top & Bottom Performers

Despite late-quarter selling in the bellwether AI chipmaker, Technology was the top sector performer in all three time periods. While Energy was among the worst performing sectors in June and the second quarter, Energy (+10.93%) is third best top performer this year. Real Estate is the sole negative performing sector this year but trimmed its YTD loss to 2.45%. 

The yield on benchmark 10-year Treasury notes rallied during the second quarter, ending June at 4.371%, up 0.17% from 4.201% at the end of March. Treasury prices were weaker across the curve as market expectations for multiple 2024 rate cuts diminished over the quarter.

In fixed-income performance, U.S. Treasurys (as measured by the Bloomberg U.S. Government Bond Index) advanced 1% in June, capping a 0.11% second quarter gain and trimming its YTD loss to 0.83%. Likewise, longer-term U.S. Government bonds jumped 1.65%, cutting its second quarter and YTD losses to 1.80% and 4.99%, respectively.

In other fixed-income assets, investment-grade bonds of all types (as measured by the Bloomberg U.S. Aggregate Bond Index) rose just 0.07% for the quarter. Non-investment-grade High-Yield corporate bonds performed best, climbing 1.09% in the second quarter. Municipal Bonds (+1.53%) led in June, outperforming Treasuries, but declined 0.02% for the quarter.

This report is created by Cetera Investment Management LLC. For more insights and information from the team, follow @CeteraIM on X.

About Cetera® Investment Management 

Cetera Investment Management LLC is an SEC registered investment adviser owned by Cetera Financial Group®. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers. 

About Cetera Financial Group 

“Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC (marketed as Cetera Financial Institutions or Cetera Investors), and Cetera Financial Specialists LLC. All firms are members FINRA / SIPC. Located at 655 W. Broadway, 11th Floor, San Diego, CA 92101. 

Disclosures 

Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services. 

The material contained in this document was authored by and is the property of Cetera Investment Management LLC. Cetera Investment Management provides investment management and advisory services to a number of programs sponsored by affiliated and non-affiliated registered investment advisers. Your registered representative or investment adviser representative is not registered with Cetera Investment Management and did not take part in the creation of this material. He or she may not be able to offer Cetera Investment Management portfolio management services. 

Nothing in this presentation should be construed as offering or disseminating specific investment, tax, or legal advice to any individual without the benefit of direct and specific consultation with an investment adviser representative authorized to offer Cetera Investment Management services. Information contained herein shall not constitute an offer or a solicitation of any services. Past performance is not a guarantee of future results. 

For more information about Cetera Investment Management, please reference the Cetera Investment Management LLC Form ADV disclosure brochure and the disclosure brochure for the registered investment adviser your adviser is registered with. Please consult with your adviser for his or her specific firm registrations and programs available. 

No independent analysis has been performed and the material should not be construed as investment advice. Investment decisions should not be based on this material since the information contained here is a singular update, and prudent investment decisions require the analysis of a much broader collection of facts and context. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The opinions expressed are as of the date published and may change without notice. Any forward-looking statements are based on assumptions, may not materialize, and are subject to revision. 

All economic and performance information is historical and not indicative of future results. The market indices discussed are not actively managed. Investors cannot directly invest in unmanaged indices. Please consult your financial advisor for more information. 

Additional risks are associated with international investing, such as currency fluctuations, political and economic instability, and differences in accounting standards. 

A diversified portfolio does not assure a profit or protect against loss in a declining market. 

Glossary 

The Bloomberg U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government–related and corporate debt securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) debt securities that are rated at least Baa3 by Moody’s and BBB- by S&P. Taxable municipals, including Build America bonds and a small amount of foreign bonds traded in U.S. markets are also included. 

The Bloomberg U.S. Municipal Bond Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds. Eligible securities must be rated investment grade (Baa3/BBB- or higher) by Moody’s and S&P and have at least one year until final maturity, but in practice the index holding have a fluctuating average life of around 12.8 years. 

The Bloomberg U.S. Corporate High Yield Index measures the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. Payment-in-kind and bonds with predetermined step-up coupon provisions are also included. Eligible securities must have at least one year until final maturity, but in practice the index holdings has a fluctuating average life of around 6.3 years. 

The Bloomberg U.S. Government Bond Index is comprised of the U.S. Treasury and U.S. Agency Indices. The index includes U.S. dollar-denominated, fixed-rate, nominal US Treasuries and US agency debentures (securities issued by US government owned or government sponsored entities, and debt explicitly guaranteed by the US government). 

The Bloomberg Commodity Index is a broadly diversified index that allows investors to track commodity futures through a single, simple measure. It is composed of futures contracts on physical commodities and is designed to minimize concentration in any one commodity or sector. It currently includes 19 commodity futures in five groups. No one commodity can comprise less than 2% or more than 15% of the index, and no group can represent more than 33% of the index (as of the annual re-weightings of the components). 

The Cboe Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 

The MSCI EAFE is designed to measure the equity market performance of developed markets (Europe, Australasia, Far East) excluding the U.S. and Canada. The Index is market-capitalization weighted. 

The MSCI Emerging Markets is designed to measure equity market performance in global emerging markets. It is a float-adjusted market capitalization index. 

The MSCI All-Country World Index (ACWI) is a market cap weighted index designed to represent performance of the full opportunity set of large- and mid-cap stocks across 23 developed and 26 emerging markets, covering more than 2,700 companies across 11 sectors and approximately 85% of the free float-adjusted market capitalization in each market. 

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. 

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. 

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe and is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. 

The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. 

The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap represents approximately 31% of the total market capitalization of the Russell 1000 companies. 

The S&P BSE SENSEX Index is a free-float market-weighted index of 30 well-established and financially sound stocks on the Bombay Stock Exchange, representative of various industrial sectors of the Indian economy. 

The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. 

The Nasdaq Composite Index includes all domestic and international based common type stocks listed on The NASDAQ Stock Market. The NASDAQ Composite Index is a broad-based capitalization-weighted index. 

The Shanghai Composite Index is a stock market index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. 

The U.S. Dollar Index is a weighted geometric mean that provides a value measure of the United States dollar relative to a basket of major foreign currencies. The index, often carrying a USDX or DXY moniker, started in March 1973, beginning with a value of the U.S. Dollar Index at 100.000. It has since reached a February 1985 high of 164.720, and has been as low as 70.698 in March 2008. 

West Texas Intermediate (WTI) is a crude oil stream produced in Texas and southern Oklahoma which serves as a reference or "marker" for pricing a number of other crude streams. WTI is the underlying commodity of the New York Mercantile Exchange's oil futures contracts.
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