Commentary

Q2 2024 – Market Update

2024 continues to play out ‘better than expected’ for equity investors. Despite the anticipation of rate cuts early in the year, stocks have taken the re-pricing of rate cuts in stride and continue to grind higher. As we wrote in our Q1 letter, sufficiently muted expectations of the economy and markets to begin the year has allowed companies to hurdle over that low bar.

We viewed the April correction in equity markets as healthy, allowing stocks to absorb overbought conditions from an impressive ~5-month rally and gather themselves for the next leg higher. We remain constructive of the equity markets, but also wouldn’t be surprised to see another similar pullback in the second half. Again, we would likely be buyers of any pullbacks as long as earnings growth continues, and cooling inflation remains the reason for interest rate cuts – not a significantly deteriorating economy. So far, the soft-landing scenario seems to be the most likely.

Also important to our thesis would be further signs of participation from more areas of the market. We started to see that a bit in March, but breadth waned in the pullback in April. Through the end of the second quarter and the first week of July, returns continued to be very concentrated in large cap and technology. However, last week we saw a glimpse of what the market could look like in a broadening scenario. A week does not make a trend, but …..

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