We’re halfway through 2024, and what a year it has been for the stock market. Every major large-cap stock index rose through the first six months of the year, driven largely by tech gains powered by the artificial intelligence craze.

The S&P 500 gained 15% since January, and hit an impressive 31 all-time highs so far this year, topping out at 5487 in late June. The Nasdaq is up about 18%, and the stodgy, largely tech-free Dow has risen a less-impressive 3.83%.

A few key tech stocks, but mostly one (you know who you are, Nvidia), carried the market on their backs. Nvidia, Microsoft, Apple, Google, and Amazon made up 62% of the equal-weighted S&P 500’s return year to date, according to Goldman Sachs analyst David Kostin.

The utilities sector was a surprise winner in the first half of the year thanks to its ties to the AI trade, propelling the sector up about 9%. Real estate fared the worst, sinking 2% in the first half, according to Kostin.

The best performers of the first half year were Super Micro Computer, which rose 188% on huge AI hype; Nvidia, which surpassed a market cap of $3 billion after rising about 155% since January; and Vistra Corp, which rose 125% year to date thanks to its position as a key electricity supplier to AI datacenters.

The worst performers of the year were Walgreens Boots Alliance, which tanked 52% after a recent terrible earnings report; Lululemon Athletica, which is down 42% thanks in no small part to the resignation of its longtime chief product officer; and Intel, which fell 38% after apparently missing the AI boat.

Flying too close to the sun?

Heading into the year, investors had hoped that the Federal Reserve would deliver up to six rate cuts—but their dreams were crushed by inflation, which remained sticky into the first quarter of the year, pushing bond yields even higher.

Only the most recent PCE readings have shown that inflation is indeed decelerating. Now, most economists predict one rate cut coming in September.

In spite of inflation hanging around, investors are feeling good about the market’s performance at halftime. However, narrowing market breadth throughout the second quarter illustrates that the market’s growth could be dangerously focused on the tech sector. The equal-weight S&P 500, which doesn’t place as much emphasis on the huge market caps of the tech behemoths, is only up 4% this year—a steep underperformance compared to its market cap-weighted cousin.

“The AI story has continued, yet signs of weakening economic activity helped drive down market interest rates in the second quarter,” explained Chief Investment Officer of Comerica Wealth Mangement John Lynch in a recent note. “This propelled stocks higher, leaving investors to ponder the sustainability of valuations.”

What else do investors need to know besides Nvidia is still Nvidia-ing?

• The S&P 500 gained 10.8% in the first quarter, while only gaining 4.6% in the second quarter of the year. The AI momentum dramatically slowed over the second quarter, causing a tech selloff.
• Small caps haven’t performed well. The small-cap Russell 2000 only gained 1.7% over the first half, and was down 3.3% in the second quarter of this year, as smaller stocks lagged behind their bigger peers.
• Crypto is so back. Bitcoin has gained about 47% year to date after novel spot bitcoin exchange traded funds were approved in mid-January. The crypto rally has carried ethereum up with it as well, with the digital asset rising about 50% year to date as it prepares to get its own ETFs.
• Bonds have had a wild ride. “The Bloomberg Aggregate Index had fallen more than 3.5% between the start of the year and mid-April as investors began pricing out the overly optimistic expectations for Fed rate cuts in 2024,” wrote Lynch.
• Oil is up about 14% this year so far as geopolitical instability and supply shortages plague the oil market. 
• Silver gets the gold: The commodity is up about 22% this year, outpacing gold and copper, which both gained about 13% through the first six months of the year. All three commodities have benefited from the market’s focus on AI and electrification, but silver has outperformed thanks to strong demand from China.

There hasn’t been a dull moment in 2024 yet, and no doubt the second half will have plenty of excitement in store for us as well. —LB

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July is a great month for stocks, historically speaking. But as the tweet above notes, it's less about a month full of high performance and more about a month with very few misses.

In his seminal work Winning the Loser's Game, Charles D. Ellis noted that investing is a lot like tennis. The pros are able to score points thanks to their skill, but for the amateur, it's less about nailing a shot (or an investment, as it were), and more about making as few mistakes as possible. Maybe that makes July the perfect month for retail investors.

🟢 What’s up

• Tesla rose another tk% today, continuing its push higher thanks to quarterly car deliveries that beat Wall Street’s expectations. Rivian Automotive rose tk% today after beating projections for their own deliveries as well.
• Paramount Global rose tk% on a report from the New York Times that Barry Diller’s IAC may be exploring an acquisition of the embattled entertainment company. IAC rose just tk%.
• Archer Aviation popped tk% after the air taxi manufacturer received a $55 million investment from Stellantis.
• Oliveda International is up tk% today after the olive oil company announced massive quarterly revenue growth at a key subsidiary.

What’s down

• Chewy fell yet another tk% as fallout from Roaring Kitty’s stake in the company continues to rattle investors.
• Pure Storage plunged tk% after UBS analysts downgraded the stock to “sell,” citing its high valuation and overhyped AI potential.
• Home builders took a beating after Citi analysts downgraded Lennar and D.R. Horton from “neutral” to “sell,” noting the housing market will remain soft in the second half of the year. Lennar dropped tk%, and D.R. Horton fell tk%.

• The number of job openings in the US rose unexpectedly in May, jumping to 8.14 million, in yet another sign that the labor market is holding strong.
• Bill Ackman’s new fund won’t charge investors any performance fees as the fund manager attempts to entice retail investors.
• Nvidia is too big to ignore, at least according to antitrust regulators in France, who are charging the chipmaker for anti-competitive practices.
• The SEC is charging Silvergate Capital, a crypto-loving bank, with securities fraud due in no small part to connections with crypto exchange FTX.
• One bullish economist believes the S&P 500 could hit 7,000 by 2025 thanks to AI hype.
• Cheap toilet paper sales are a sign of rising economic distress among US consumers. Maybe that’s why our office building insists on stocking it.

A whole mess of reports are dropping ahead of the holiday:

• The ADP report measures private employment in the US. Nonfarm jobs rose by 155,000 last month, down from 188,000 in April, and is forecast to rise 159,000 in June.
• The ISM Services Index is a survey that measures the state of service-based companies. Last month’s reading showed an improvement in the sector, and economists are hoping to see that trend continue.
• Initial jobless claims continue the week of employment data, and are expected to continue to rise week-over-week.

Plus, the release of last month’s FOMC minutes will give investors some insight into how the Fed is feeling about the latest economic data.

There’s also one final earnings report this season worth mentioning: Constellation Brands. The beverage maker may be a sin stock, but alcohol sales remain steady no matter the economy, which means it’s a favorite on Wall Street at the moment. Analysts have an average price target that’s 16.13% higher than today’s price. Consensus: $3.46 EPS, $2.67 billion in revenue.

And just a reminder that markets close at 1 pm tomorrow to give traders a head start on their 4th of July vacation.