AE Wealth Management: Market Minute 07/25/24 — Markets move downward as tech earnings disappoint
Market Minute
July 25, 2024
Markets moved down significantly on Wednesday. The S&P 500 and Nasdaq both had their worst one-day decline since 2022, while the Dow dropped 504 points. The primary culprit? Disappointing second-quarter earnings from tech giants such as Tesla and Alphabet (Google’s parent company).
To give some perspective, this drop seemed inevitable considering that at the end of June the Magnificent 7 (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla) minus Tesla accounted for well over half of this year’s returns of the S&P500 and 38 new highs. With the growing likelihood of a rate cut at some point in the next few months, it’s only natural that we’d see names that have been beaten up recently, like small cap stocks and other more value names in the S&P, become the place to be.
This is an instinctive reversion to the average trade we are experiencing and if it feels more severe than normal that’s because of the magnitude of outperformance this year has been so extreme.
The volatility index (VIX) also saw a sharp increase to close the day. Apart from a spike in mid-April, volatility has been relatively mild so far this year. As a result, investors may be jarred by the sudden market drop.
This week’s drop may be the start of a rough patch for markets, particularly with the latest consumer spending report scheduled to be released later this week. The data will definitely play into the Federal Reserve’s decision about interest rate cuts at its meeting next Tuesday and Wednesday. If the Fed seems to be hedging about rate cuts in September, markets won’t like that, and volatility could stay higher for longer.
This week’s events are a reminder that markets can—and do—pull back from time to time. When they do, it’s important to look beyond short-term events and focus on the bigger picture. If you haven’t done so recently, now is a good time to revisit your goals and reposition your portfolio to address unnecessary risk in a shifting economic environment.
This is provided for informational purposes only. This information is not intended to be used as a sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. None of the information contained herein shall constitute an offer to sell or solicit any offer to buy a security.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
This information is provided to you by AE Wealth Management, LLC (AEWM) and AE Financial Services, LLC (AEFS).
AE Financial Services, LLC (AEFS) is a Broker Dealer located in Topeka, Kansas.
AE Wealth Management, LLC (AEWM) is an SEC Registered Investment Adviser (RIA) located in Topeka, Kansas.
Registration does not denote any level of skill or qualification.
7/24 – 3745072