July 2, 2024

Institutional BlogNews

Rockbridge Institutional – June 2024 Market Review

Market Review


Returns of stock market indices over the last quarter were mixed. The S&P 500 Index was up above 4%.  Stocks traded in Emerging Markets also turned in a good quarter, MSCI Index was up 5%. Domestic small cap stocks (Russell 2000 Index), on the other hand, were up over 3%. Stocks traded in developed international markets (EAFE Index) were about flat.

The past 12 months have been good for stocks. The S&P 500 was up 26% while other stock market indices were up between 10% and 13%.

The S&P 500 returns of 15% and 26% over the year-to-date and trailing twelve months, respectively, are well above those of other stocks and largely explained by stocks of just a half-dozen companies that are expected to benefit from the continued development of

Artificial Intelligence (AI) technology – Amazon, Apple, Google, Meta (Facebook), Microsoft, and of course, Nivida. Recent results for these companies are shown in the accompanying table: Note not only the levels, but also the differences among the recent results of these companies. Nvidia, the so-called bellwether for AI, stands out.


Bond yields did not move much over the quarter. With little impact from changing yields, returns are up about one percent across all maturities. Year-to-date yields have increased about 0.5% resulting in negative returns, especially at longer maturities where increasing interest rates have a larger inverse effect. The pattern of bond yields for various maturities continues to be downward-sloping, signaling falling interest rates ahead, which is consistent with the Fed’s announcement of one reduction in the Federal Funds rate this year.

The Fed is committed not to let inflation get out of hand. The spread between longer-term (5-year) nominal interest rates and inflation-adjusted rates is still a reasonable 2.2%, signaling modest inflation expectations. In any event, the path of future interest rates remains uncertain resulting in continued market volatility going forward.


The “Bull” market we have been enjoying is explained by the six stocks listed in the above table.  Obviously, to have enjoyed recent results it is crucial to have been invested in these stocks, which reflect expectations of the impact of Artificial Intelligence (AI). While expected to be profound, the future of AI is unpredictable. The short-term impact on various markets is sure to be volatile, producing significant risk in seeking to identify the future impact of AI on individual stocks.

The principle of diversification is that by holding several asset classes that move independently from one another, risk is reduced without reducing expected return. However, this strategy is difficult to implement when extraordinary returns are concentrated in just a few stocks. Yet, it is the only safe way to take advantage of the recent extraordinary rise in the few Tech stocks with appropriate risk.

The market prices of these stocks reflect where those excited about the future benefits of AI technology (buyers) trade with those concerned that we are ahead of ourselves (sellers). The economic impact of AI cannot be predicted – it is best to rely on what the market tells us, remain diversified, and hang on for the ride.

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