“Whoa, we're halfway there. Take my hand—we’ll make it, I swear!” —Bon Jovi

Key Points:

Equities Performance:

June was a great month for stocks. The Dow went up by 1.2%, the S&P 500 jumped 3.6%, and the NASDAQ soared 6%.
Large-cap stocks had a solid month, with the Russell 1000 gaining 3.3%. However, small-caps struggled, as the Russell 2000 fell by 0.9%.

Sector Performance:

Technology stocks led the way with a 7.8% increase, followed by Consumer Discretionary at 3.9% and Communication Services at 3.2%.
Utilities, which had been doing well, saw the biggest drop, declining by 5.6%.

Economic Data:

The unemployment rate rose to 4.1%, up from 4% in the month prior and the highest reading in almost three years.
Both new and existing home sales decreased, although the median existing home sales price hit another all-time high.
Inflation is still hovering between 3-4%, with core inflation showing a decline.

Treasury Yields and Bond Funds:

Treasury yields mostly fell, except for the 3-month T-Bill.
The 5-year Treasury note had the biggest drop for the second month in a row, falling by 19 basis points.
Other Treasury notes, including the 2-year, 3-year, 10-year, 20-year, and 30-year, also saw double-digit declines.

Our Take

(in case you missed last month’s Market Recap)

Recent data shows the economy is slowing down. While inflation has dropped significantly, reaching the Fed’s 2% target is still a challenge. This slower economic data is actually good news in the fight against inflation. We expect spending to decline this year, but we believe the economy can avoid a recession, which would allow the Fed to begin to lower rates later this year.

Despite high inflation and interest rates, the stock market is doing well, thanks to strong corporate profits. We expect that rates will move downward as inflation continues to fall in the coming months, leading us to think that equities could get a further boost and also benefit fixed income.

We know that rate hikes and inflation have taken a toll on the economy, hitting some industries more than others. We'll be on the lookout for signs of trouble, like rising default rates or stagflation (persistent inflation with slowing growth).

Volatility tends to pick up in election years, but it usually rallies after the results, with the economy often being the key factor. However, we will be watching the new political dynamics that have been introduced to see how they unfold.

We’re also keeping an eye on geopolitical events, especially any escalation that could cause oil shocks. The biggest potential risk is China’s possible aggression toward Taiwan.

As things evolve, we’ll adjust our portfolios…if needed.

Equities continued their positive streak in June to close out the first half of the year. The Dow Jones Industrial Average edged 1.2% higher in June, the S&P 500 advanced 3.6%, and the NASDAQ surged 6%. It was a much better month for large-caps; the Russell 1000 index gained 3.3% while the small-cap Russell 2000 index lost 0.9%.

Despite the broad index gains, only five of the eleven sectors contributed to the positive month for equities. The gains were largely led by Technology’s 7.8% increase, followed by Consumer Discretionary at 3.9% and Communication Services at 3.2%. On the opposite side of the spectrum, Utilities went from first to worst with a 5.6% decline.

How Does the Stock Market Perform in an Election Year? - Nick Maggiulli

Every four years we hear that “this might be the most important election of your life.” But with soaring debt, rising geopolitical instability, and continued economic uncertainty, this time they may just be right. But, before we look at how U.S. stocks might perform after a Biden or Trump victory, let’s look at how stocks tend to perform after a U.S. presidential election in general.

In the seven or so weeks following an election, there can be lots of uncertainty around how the future might unfold. But, if we look at how markets perform after an election, they are typically pretty average.

While stock performance has varied quite a bit since 1950, U.S. stocks tend to rise slightly following an election (or in the same period during a non-election year). The biggest exceptions to this were in 2008, when markets declined by nearly 11% from election day to year end, and in 1998, when they increased by almost 10% as the Dotcom bubble continued to inflate.

However, if we look at the average performance in election years versus non-election years, all these differences wash out. Plotting the average performance of the 18 election years and 56 non-election years in the data, we see basically no long-term difference in performance:

While markets tend to perform worse (on average) in the first few days following the election, there seems to be no lasting impact on stocks through year end. In fact, the average return following election day through December 31 is 2.3% in an Election Year compared to 2.4% in a Non-election Year. In other words, their returns on average are basically the same. The median (50th percentile) return is similar as well, with a 2.9% return in an Election Year compared to 2.4% during a non-election year.

Overall, the U.S. Presidential election does not seem to have any lasting impact on markets in the weeks following the election. While the outcome of the 2024 U.S. Presidential election remains uncertain, history suggests that the stock market is likely to perform similarly regardless of who wins. In the short term, markets may react positively or negatively to the election results, but those effects tend to even out over time.

Conclusion: There have been several peaks and valleys along the way, but the S&P 500 has grown in value over the long term regardless of who’s in office. Ultimately, the key to navigating the uncertainty of an election year is to stay informed and avoid making emotional decisions based on short-term political events.

The U.S. economy and stock market have made it through countless political cycles before and will make it through this one as well. So, no matter who wins in November, history suggests that staying the course is often the best course of action. No matter the circumstance, focusing on long-term investing goals should always be the most important factor in investment decision-making.

The Economic Data Rundown

Employment

The US economy added 206,000 nonfarm payroll jobs in June, more than the 190,000 expected by economists. The unemployment rate rose to 4.1%, up from 4% in the month prior and the highest reading in almost three years. June's job additions were a slight decline from May.

Consumers and Inflation

May’s US inflation figure registered at 3.27%, a decline of under one-tenth of a percentage point and the eleventh consecutive month that Year-over-Year (YoY) inflation has hovered in the 3 to 4 percent range. Core Inflation lowered to 3.42%, marking the 13th monthly decline in the last 14 months. The US Consumer Price Index was flat Month-over-Month (MoM), and US Personal Spending rose a quarter of a percent. The Federal Reserve held its key Fed Funds Rate at 5.50% at its June 12th, 2024 meeting, marking the seventh consecutive meeting in which the Fed left rates unchanged. New inflation data will be released on Thursday.

Production and Sales

The US ISM Manufacturing PMI stayed in contraction territory for the third straight month, slipping another 0.2 points in June to 48.50. The YoY US Producer Price Index for May was 2.24%, the second consecutive month above 2% since April 2023, while April US Retail and Food Services Sales were up 0.09% MoM.

Housing

US New Single-Family Home Sales plummeted 11.3% in May, while US Existing Home Sales were down a much lighter 0.7% MoM. Despite the overall contraction in housing demand, the Median Sales Price of Existing Homes rose another 3.1% and set a new all-time high of $419,300. Mortgage rates fell for the second straight month; as of June 27th, the 15-year Mortgage Rate lowered to 6.16% and the 30-year clocked in at 6.86%.

Commodities

The price of Gold traded sideways in June, falling slightly MoM to $2,330.90 per ounce as of June 28th. Crude oil prices surged higher this month—as of June 24th, the price of Brent increased 9.1% to $86.75 per barrel. Despite rising oil prices, the average price of gas fell 14 cents to $3.56 per gallon.

As always, don’t hesitate to contact us if you have any questions about what impact, if any, this may have on your financial plan.

For more great insights, highlights, and financial education,

follow MDL Wealth Management on:

This newsletter was prepared by YCharts with added commentary.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk.

The economic forecasts set forth in this material may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

The Standard & Poor’s 500 Index (S&P500) 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. All indices are unmanaged and may not be invested into directly. The fast price swings in commodities may result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. Precious metal investing may involve greater fluctuation and potential for losses.