Mid-Year Outlook: U.S. Stocks and Economy

Before getting to the outlook for the second half, let's assess how the first half unfolded relative to our expectations heading into this year. Although the economy has weakened less than we expected and market leadership has remained narrower than we expected, we did correctly anticipate:

  • Multiple cross-currents in term of economic data and inflation
  • "Rolling" pattern of strength and weakness among segments of the economy
  • Some cracks forming in the labor market and consumer spending
  • Continued disinflation, but not in a straight line
  • Moving target in terms of Federal Reserve policy expectations
  • Gradual move up in the unemployment rate
  • Heightened focus on the budget deficit and government debt
  • Inverse relationship between Treasury bond yields and stocks persisting
  • Quality-oriented factors continuing to define leadership
  • Magnificent 7 not dominating performance as much in 2024
  • Lens of Artificial Intelligence (AI) widening from "creators" to "adopters"