June Market Recap
June was a great month for large technology stocks and a good month for the Federal Reserve.
Artificial Intelligence has been the fuel driving the stock market higher for some time, and this theme accelerated last month. The S&P 500 spent most of June breaking records highs, thanks largely to its largest components:
- The 3 largest companies in the S&P (Microsoft, Nvidia and Apple) make up 21% of the index, a record high for 3 companies.
- The S&P index is outperforming the small cap index year-to-date at a rate not seen since 1999.
- S&P companies related to AI gained 14.7% in Q2 while the rest lost 1.2%.
- Investors poured a record amount of money into technology funds the third week of June.
Those investors are betting technology companies strong earnings growth continues. Currently, the P/E ratio (a company’s stock price divided by its earnings) for the 10 largest S&P companies is hovering around 28. The P/E ratio of the other 490 companies? 17.5.
Benchmark Returns: June 2024 | YTD 2024
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Dow Jones
|
S&P 500
|
NASDAQ
|
+1.12% | +3.79%
|
+3.47% | +14.48%
|
+5.96% | +18.13%
|
|---|
U.S. Federal Reserve officials got encouraging data in June. Personal consumption expenditures (PCE), the Fed’s preferred inflation gauge, rose 2.6% from a year ago. That is the slowest annual increase in more than 3 years.
Earlier in the month, the consumer price index also showed its slowest pace in more than 3 years. Fed Chair Jerome Powell said the CPI data “was certainly a better inflation report than almost anyone expected”.
Initial jobless claims rose higher than forecasted, and the unemployment rate drifted to 4%. Treasury Secretary Janet Yellen said the labor market was no longer boosting inflation, “now resembling what it looked like pre-pandemic”. Even with the increase, that makes 30 consecutive months at or below 4%, the longest stretch in over 50 years.
While the Federal Reserve left rates unchanged after its June meeting, the European Central Bank made its first cut on June 6th, reducing its deposit rate from 4.0% to 3.75%. ECB President Christine Legarde said inflation had eased enough to begin cutting but declined to indicate how fast or deep future cuts might be. It was the first cut since 2019.
Emerging Market stocks jumped after the cut and finished June up 3.94%, while developed international stocks measured by the EAFE fell 1.59% last month.
Bond yields fell slightly in June with the encouraging inflation data. The 10-year US Treasury finished the month yielding 4.33% (compared to 4.51% a month earlier).
Oil finished up 2.14% in June.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
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