Economic Outlook & Market Review 3Q24
7-16-24
KEY TAKEAWAYS:
- Artificial Intelligence (AI) dominated investor psyche and drove market performance during the quarter. Market sentiment was also supported by the expectation of a continued expansion, a rebound in corporate earnings, and Fed interest rate cuts.
- We believe the transition to lower interest rates will be slow and longer-term rates are likely to remain elevated, which will have significant investing implications.
- The US economy’s underpinnings remain constructive, fortified by continued strength in the labor market, a healthy consumer, and strong corporate balance sheets.
- Despite anticipated volatility, domestic markets remain attractive. Stocks should benefit from continued spending and, for those seeking current income, short and intermediate bonds offer attractive yields.
Artificial Intelligence (AI) stocks dominated investor psyche during the second quarter. The S&P 500 was up 4% in the quarter, led by Nvidia Corporation and supported by generally constructive economic reports and stable interest rates. While AI, which has been under development since the 1950s, has been the dominant theme of market performance for the last several quarters, up until recently it was largely an afterthought for the public. The November 2022 release of ChatGPT proved a seminal moment and immediately changed the calculus for investors, businesses, government, and consumers.