A Resilient Stock Market

financial planning for attorneys financial planning for entrepreneurs financial planning for retirement financial planning for young professionals mid-life financial planning Jun 20, 2024

As we reach the midpoint of 2024, the market is up. And it keeps going up! Economic indicators reveal a nuanced picture, with sectors experiencing varying degrees of growth amidst persistent uncertainties. Let’s delve into recent market trends and economic developments so you can better navigate today's investment environment. 

Resilience Across Sectors  

Stocks continue to perform well, buoyed by strong corporate earnings in technology. We’ve been hearing for the last couple of years that we should expect a recession. The economy doesn’t feel rosy, especially since inflation has burned a hole in our wallets, but the recession has not come.

A mild recession within the next couple years may occur, perhaps, but that doesn’t mean the market will plummet for an extended period of time. In fact, the correlation between U.S. stock market returns and changes to our Gross Domestic Product (GDP) is near zero. To highlight this point, of the 31 recessions that have hit the U.S. since the Civil War, 16 of these recessions produced positive stock market returns! More on this from our research: 

There have been 16 recessions which had positive stock market returns—as measured from the start to the end of each recession. These positive-market recessions lasted on average 16 months, with stock returns ranging from 38.1% to 0.02%, with an annualized cumulative return of +9.8% and an average GDP decline of -2.7%.* -Source: -Russell  

In other words, as we've said for years, don't confuse the economy with the stock market.

Inflation and Monetary Policies  

Inflation remains a significant concern globally. Central banks are carefully adjusting monetary policies to balance economic growth with price stability. Decisions by the Federal Reserve and European Central Bank will be critical in shaping market sentiment moving forward. 

Sector Spotlight: Technology and Innovation  

Technology remains a pivotal sector driving economic growth in 2024. Advances in artificial intelligence, cloud computing, and cybersecurity continue to attract investor interest. Companies at the forefront of innovation are poised to capitalize on evolving consumer behaviors and digital transformation trends. 

Political Landscape: Navigating Election Uncertainty  

As we approach the presidential election later this year, concerns about political uncertainty may loom large for investors. It's important to note that while elections can introduce short-term volatility, historical data show that markets tend to adapt and continue on their long-term trajectory regardless of political outcomes. Fear of uncertainty shouldn't deter investors from participating in markets, especially when armed with diversified portfolios and a focus on fundamental economic trends.

2024 continues to present a complex yet promising investment landscape. By staying informed, investors can make well-informed decisions aligned with their financial objectives.

By Jonathan Cameron, CFP®

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Photo by Myriam Jessier on Unsplash

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