The U.S. stock market continued its upward ascent in the second quarter (Q2) of 2024, once again led by the S&P 500 Index.¹ The quarter did not begin smoothly, however, with the S&P 500 Index declining by (4.2%) in April before rising by 8.4% over the last two months of the quarter. Mega cap technology stocks were at the tip of the spear once again, with the Nasdaq-100 Index² appreciating by 7.8% in the quarter, led by generative AI darling NVIDIA Corporation (NVDA), which was up 36.7% in Q2 2024. Despite forecasts calling for a broader market rally, the market narrowed considerably in the quarter, with the S&P 500 Equal Weight Index³ declining by (3.1%) in the quarter compared to a 3.9% increase in the market-cap weighted version of the index.⁴

International stocks lagged their U.S. counterparts with the MSCI World ex USA Index⁵ declining (0.6%) in Q2 2024. In advanced economies, European stocks were adversely impacted by slower economic growth and tighter monetary policy in the Eurozone. Emerging market returns flipped the script in Q2 2024, exceeding developed international market returns in the quarter as strong tech sectors in Taiwan and South Korea benefited from AI-related enthusiasm. In addition, India continued to be a bright spot among developing economies, buoyed by strong GDP growth and continued inflows from overseas investors.

The most recent Federal Open Market Committee’s projections for rate cuts imply one 25 basis point rate cut by the end of 2024, down from market expectations of three 25 basis point cuts at the end of Q1 2024. Consequently, after outperforming the S&P 500 Index in Q4 2023, the small cap Russell 2000 Index⁶ continued to underperform the broader market, declining by (3.6%) in Q2 2024 as the “higher for longer” interest rate environment took a firmer hold.⁷

10-Year Treasury yields climbed for most of the first month of the quarter, reaching a Q2 high of 4.74% on April 24th. A pullback in yields resulted in the 10-Year Treasury Yield bottoming out at 4.19% on June 13th before rising once again to close out the quarter at 4.36%. From a performance perspective, the Bloomberg Aggregate Bond Index⁸ increased by only 0.07% in the quarter as declining bond prices were offset by higher starting yields. Long-term bonds experienced losses as they tend to be more sensitive to changes in interest rates and interest rate expectations.