The S&P 500 on Friday advanced 14.48% for the first half of 2024, posting gains in five out of six months. Its accompanying SPDR S&P 500 ETF Trust added 14.50% for H1.
Wall Street's benchmark gauge has been on a record-breaking run, largely driven by a blistering rally in technology stocks over the artificial intelligence (AI) craze, and progress towards a scenario where the Federal Reserve can finally begin to unwind the unprecedented monetary policy tightening campaign it unleashed to combat the fallout from the COVID-19 pandemic.
Some quick stats:
The S&P 500 notched an all-time intraday high of 5,523.64 points in H1, and a record closing high of 5,487.05 points.
The index posted 32 all-time intraday highs in the first half of 2024, making it the sixth-highest number for any H1 since 1928.
The index crossed several historic milestones - it hit 5,000 points for the first time ever on February 8. It then took out the 5,100 and 5,200 levels in quick succession on February 23 and March 20, respectively. Following a brief respite, the S&P (SP500) scaled 5,300 on May 15 and then 5,400 on June 12. Finally, it surpassed 5,500 last Thursday.
The benchmark average's best month in H1 was February, in which it rose 5.17%. It retreated for only one month - a 4.16% loss in April.
AI and Magnificent 7 Dominance
The S&P 500 Information Technology sector has rocketed a stunning 27.8% in H1, while its accompanying Technology Select Sector SPDR Fund ETF (XLK) has soared 17.5%.
The climb has come as AI continues to consolidate its position as the biggest technological development in years. Companies are scrambling to add AI services and products to their portfolios, and terms such as "large language models" and "generative AI" have become common parlance.
Speaking of Nvidia, the stock has enjoyed a meteoric rise due to the seemingly inexhaustible demand for its AI chips. It has, along with Microsoft and Apple, become one of the three largest publicly listed firms in history, while firmly entrenching its position in the "Magnificent 7" club. The seven members of that club have together given an average return of nearly 36% for H1.
However, the dominance of the megacap names and the outsized role played by the technology sector in driving the U.S. bull run have also led to concerns about market breadth and overvaluation.
H1 Sector Performance
Turning to the performance of the S&P 500 sectors in the first six months of 2024, all 11 notched gains except Real Estate. Technology led the way with the aforementioned ~28% jump, while Communication Services also rocketed about 26%.
See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from December 29, 2023 close to June 28, 2024 close:
#1: Information Technology +27.79%, and the Technology Select Sector SPDR Fund ETF (XLK) +17.53%.
#2: Communication Services +26.09%, and the Communication Services Select Sector SPDR Fund (XLC) +17.89%.
#3: Financials +9.25%, and the Financial Select Sector SPDR Fund ETF (XLF) +9.34%.
#4: Energy +9.09%, and the Energy Select Sector SPDR Fund ETF (XLE) +8.72%.
#5: Utilities +7.58%, and the Utilities Select Sector SPDR Fund ETF (XLU) +7.60%.
#6: Consumer Staples +7.55%, and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +6.32%.
#7: Industrials +6.97%, and the Industrial Select Sector SPDR Fund ETF (XLI) +6.91%.
#8: Health Care +6.91%, and the Health Care Select Sector SPDR Fund ETF (XLV) +6.87%.
#9: Consumer Discretionary +5.22%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +2.01%.
#10: Materials +3.13%, and the Materials Select Sector SPDR Fund ETF (XLB) +3.24%.
#11: Real Estate -4.14%, and the Real Estate Select Sector SPDR Fund ETF (XLRE) -4.12%.
In the first half of 2024, the S&P 500 showcased diverse performances across its various sectors, highlighting both resilience and volatility in the market.
Leading the charge was the Information Technology sector, boasting a remarkable growth of 27.79%. This surge was primarily driven by advancements in artificial intelligence, cloud computing, and semiconductor industries, which saw increased demand and investor confidence.
Close behind, the Communication Services sector experienced a significant rise of 26.09%. The sector benefited from the growing reliance on digital communication platforms and the continued expansion of streaming services and social media companies.
The Financials sector showed a solid performance with a 9.25% increase. This growth can be attributed to higher interest rates and robust earnings reports from major banks, which outweighed concerns over potential economic slowdowns.
Similarly, the Energy sector grew by 9.09%, supported by war and geopolitical tensions. Companies involved in renewable energy projects, in particular, saw substantial investor interest.
Utilities and Consumer Staples sectors posted gains of 7.58% and 7.55% respectively. These sectors, often seen as safe havens during uncertain times, attracted investors seeking stability amid market fluctuations.
The Industrials sector saw a 6.97% rise, driven by increased infrastructure spending and a resurgence in manufacturing activities. This sector's performance was bolstered by government initiatives aimed at boosting economic growth.
Health Care also posted a gain of 6.91%, with pharmaceutical companies and healthcare providers benefiting from ongoing innovations and an aging population requiring more medical services.
The Consumer Discretionary sector experienced a moderate increase of 5.22%. Despite facing challenges such as inflation and changing consumer spending patterns, companies in this sector managed to maintain growth through strategic adjustments and new product launches.
The Materials sector grew by a modest 3.13%, reflecting steady but limited growth. Demand for raw materials remained stable, although concerns over supply chain disruptions and geopolitical tensions tempered overall gains.
In contrast, the Real Estate sector was the only one to see a decline, with a loss of 4.14%. Rising interest rates and market saturation in certain areas contributed to the sector's underperformance, as higher borrowing costs dampened real estate investments.
Overall, the first half of 2024 demonstrated a dynamic and varied market landscape, with technology and communication services leading the way, while real estate struggled to keep pace. Investors navigated through economic uncertainties, seeking both growth opportunities and stability across different sectors.
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