Investment Update | Saratoga National Bank

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Investment Update

By Rick Schwerd | June 21, 2024

Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for our next update on July 12.

Wall Street Analysts Raise Estimates

In recent weeks, we have seen a slew of end-of-year S&P 500 estimate increases. The seemingly always bearish Mike Wilson from Morgan Stanley increased his year-end estimate for the index from 4,500 to 5,400. Goldman Sachs’ David Kostin raised his forecast from 5,200 to 5,600 and Evercore-ISI’s Julian Emanuel took the crown for the biggest swing, increasing his estimate from 4,750 to 6,000. The S&P currently sits at 5,470, up nearly 15 percent year-to-date.

Much of the increases can be attributed to analysts coming to terms with reality. Most came into the year fairly pessimistic given the strong 2023 market performance, continued high interest rates and belief that earnings growth this year was going to be subpar. Instead, we have seen strong first-half earnings growth and share gains by a handful of mega-cap tech stocks, including Nvidia, Meta, Amazon, Microsoft and Google, which drove markets. These five stocks have accounted for approximately 60 percent of the S&P 500 market returns so far this year.

We remain cautiously optimistic through the remainder of 2024. However, as we mentioned in our Investment Updates earlier this year, a 5 to 10 percent pullback during the summer and or early fall would not be a surprise. Even in the best years, a mid-year decline in this range is relatively common. The summer/early fall is typically the worst time seasonally for equity markets, and it is normal to see some volatility prior to a presidential election.

All that said, there are good reasons to be optimistic for the intermediate-to-long-term. Inflation is trending lower, and the Federal Reserve is likely to begin cutting rates over the next six months. This combination is generally a good environment for equities. On top of that, Artificial Intelligence (AI) appears to be a secular growth stimulant on par with the start of the Dot-Com era and the invention of the smartphone.

Quiet Period for News

Last week’s inflation data was well received, showing continued-albeit slow-improvement. However, there is not much on the news front over the next few weeks. The next major economic data point we will receive is the monthly job report on July 5, which is likely to be overshadowed, being in the midst of the Fourth-of-July holiday weekend. The next round of inflation data and the start of second-quarter earnings season do not come until mid-July. 

This does not guarantee markets are going to be docile over the next few weeks. When there is a dearth of news flow, sometimes seemingly innocuous news or data can grab the market’s attention and have an outsized effect in driving markets.

As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.

About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Saratoga National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships. He is also co-portfolio manager of the proprietary North Country Large Cap Equity Fund.


 

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