Tech Continues to Outpace Rest of the Market
The major U.S. stock indexes had a mixed week. The tech-focused NASDAQ and the large-cap S&P 500 both reached new record highs.
However, the smaller-cap Russell 2000 and the 30-stock Dow Jones Industrial Average (DJIA) ended the week lower.
Notably, there was a significant divergence between the NASDAQ’s 3.2% gain and the Russell 2000’s 1% loss.
This pushed the two indexes further apart year-to-date, with the NASDAQ up 17.8% and the Russell 2000 down 1.0%. The Russell 2000 slipping into negative territory for the year is a concerning development.
Two factors drove the week’s excitement:
- Strong optimism about returns from Artificial Intelligence companies led to technology and growth stocks dramatically outperforming their value counterparts.
- Investors rewarded growth and tech stocks as inflation remained flat for the previous month, fueling hopes of potential interest rate cuts that could further boost future earnings for these sectors.
The Federal Reserve met this week and, as expected, left interest rates unchanged.
Source: Morningstar
Fed officials also increased their median expectation for the federal funds rate at the end of 2024 from 4.6% to 5.1%, implying only one rate cut this year.
On a positive note, the FOMC still estimates that policy rates will fall to 3.1% by 2026.
Weekly Market Update Video
What’s Going On In Your Portfolio?
Equity portfolios are currently weighted to favor growth over value, with a focus on technology.
Seasonal trends plus positive relative strength continue to favor growth names.
As always, volatility stops are in place to help mange any potential downsize risk.
Bond portfolios continue to be fully invested in High Yield bonds, which will benefit from the potential of lower rates in 2025.
Upcoming Economic Data to Keep an Eye On
Source: Trading Economics
