In the First Quarter of this year, we noted a broadening stock market with more groups and individual stocks participating to the upside. This healthy development came to a halt in the 2nd quarter. The upward market momentum was focused on just a handful of stocks and one stock, NVIDIA, accounted for a third of the total market index gain for the year-to-date.
Thankfully, in the last two weeks there has been a dramatic market shift as a result of evidence of lower inflation. It’s become increasingly likely that the Federal Reserve will soon begin to reduce interest rates, and therefore bonds have rallied and stocks have resumed a robust market rally.
While in the midst of one of the most confusing and dramatic election cycles in history, we remember that stocks are moved principally by earnings and interest rates. The outlook for earnings this quarter continues to be excellent and finally rates will be moving in the right direction.
