Equity markets showed unexpected strength in the first half of 2024. By June 30, 2024, the SP 500 index had risen by 16%, reaching 33 all-time highs during the period. This rise was due to increased SP 500 company valuations and earnings forecasts.
Investments in AI on the rise
Investors were optimistic about the potential of artificial intelligence and economic growth.
Many SP 500 companies have reached all-time highs and generated significant gains. Nvidia, whose share price rose by over 150% in the first half of 2024, is the perfect example of this success.
This increase followed Nvidia’s announcement of the launch of its GPU Architecture model for the development of artificial intelligence, a computing model that is far superior to that of the previous generation and guarantees very high performance. It’s worth remembering that Nvidia’s technological structure is used by SP 500 giants such as Meta, Microsoft, and many others. This explains the positive impact on related share prices.
A break from cutting rates
As the market adjusted to the new interest rates, the U.S. Federal Reserve announced that it would cut rates only once or twice in 2024, contrary to its January 1, 2024 announcement, indicating that there will probably be 7 rate cuts in 2024.
Many sectors, such as transportation, are currently going through a period of recession. However, these sectors are poised to rebound rapidly as soon as monetary policy announces a further rate cut. As a result, these sectors will experience a rise in performance, which will generate inflation that needs to be stabilized, probably by a pause in rate cuts.
The Chinese economy is ready for anything
Over the past 3 years, China’s economy has continually suffered from weak growth. The Chinese equity market is currently down by around 50% from its peak in 2021.
Since the COVID pandemic, Chinese consumers have been suffering economic consequences with many sectors in decline, such as housing sales, which have fallen by almost 33% since 2021.
The Chinese government could release several hundred billion yuan to restore credit and stimulate business activity. In addition, China’s policy towards foreign investors is set to become more fluid and attractive, and an increase in profits is expected.
The second half of 2024 is shaping up to be full of surprises and unlikely scenarios. The Federal Reserve’s planned pause in rate cuts, the evolution of AI-related investments, or even the decisions of Chinese power, are key elements that could significantly influence the course of the second half of 2024.
