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The stock market saw a remarkable first half of 2024, with significant gains across major indices. The S&P 500 rose by a substantial 14.5%, the Dow Jones Industrial Average by 3.8%, and the Nasdaq Composite surged 18.1%.

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These gains were largely driven by the dominance of artificial intelligence (AI) technology firms, particularly leading tech giants often referred to as the Magnificent Seven.

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Nvidia, in particular, stood out with its shares soaring by 149% in the year, propelling it to briefly become the world’s largest public company with a valuation exceeding $3 trillion in June.

Despite inflation concerns affecting investor expectations around Federal Reserve interest rate cuts, the stock market set 31 record highs this year. Initially projecting up to six rate cuts for 2024, investors revised expectations to anticipate up to three cuts, with the Fed currently planning only one.

Recent data indicating a slowdown in inflation has buoyed market optimism for the second half of the year. The Personal Consumption Expenditures price index, a key inflation metric for the Fed, stabilized at 2.6% for the year ending in May, showing no change from April for the first time since November.

Looking ahead, the stock market’s momentum hinges on several factors. Despite ongoing record highs in major indices like the S&P 500 and Nasdaq, concerns persist over broader market participation and the sustainability of these gains across all sectors. Divergence in market breadth, where fewer companies participate in the market’s upward trajectory, poses a potential risk. Additionally, any unexpected weakness in the labor market prompting aggressive Fed rate cuts could influence market stability, although current expectations favor a more gradual rate reduction cycle.

Overall, while the stock market’s robust performance in the first half of 2024 has been driven by technological advances and adjusted inflation expectations, ongoing vigilance over market breadth and economic indicators will be crucial in determining its trajectory for the remainder of the year.

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Theresa Anyanwu

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