The market’s upward momentum continued in the second quarter, driven primarily by a handful of mega-cap stocks. Despite a rocky start in April, the S&P 500 resumed its record-breaking climb in May, with tech giants like Nvidia, Apple, Microsoft, and Alphabet leading the charge. In fact, these four stocks accounted for more than half of the S&P 500’s gains in May, propelling the Tech sector to a 10% increase.
As the quarter progressed, the mega-caps continued to drive the market’s growth, with the S&P 500 ultimately posting a 15% gain for the first half of the year. However, the S&P Equal Weight index lagged behind, rising only 5%. Sector-wise, Information Technology, Telecommunications, and Utilities were the top performers, while Materials, Industrials, and Energy struggled.
Economic data for the quarter was largely disappointing, with the unemployment rate ticking up to 4% and disinflation persisting. As a result, expectations for rate cuts in 2024 were revised downward, with most market participants now anticipating only one rate cut this year.
In this environment, our Equity Income Portfolio underperformed the CBOE BuyWrite Index (BXM) by 0.16% in the second quarter, generating a gross return of 1.33%. However, year-to-date, the strategy remains ahead of the BXM, with a gross return of 10.26%. Our top performers for the quarter included Apple, NetApp, Alphabet, NRG Energy, and Applied Materials, while Fortinet, Cardinal Health, Steel Dynamics, Trimble Navigation, and Lamb Weston Holdings lagged behind.
Looking ahead to the second half of 2024, market participants will be closely watching the Fed’s actions and positioning themselves for the presidential election. Geopolitical risks also remain a concern, and we believe our Equity Income strategy is well-equipped to navigate these uncertainties and capitalize on the resulting volatility.
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