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Stock Market Recap: June 2024
Month in Review
- Mega-cap growth companies rallied sharply higher in June, pushing the S&P 500 higher during the month (+3.59, S&P 500 TR Index).
- The rally in mega-cap growth companies opened a wide gap between growth and value in June: large cap growth rose +6.74% (Russell 1000 Growth TR Index), while large cap value fell -0.94% (Russell 1000 Value TR Index).
- Interest rates fell as data showed a drop in the rate of inflation, which pushed bond markets higher during the month (+0.95%, Barclays US Aggregate Bond TR Index)
Mega Concentration
The outlook for corporate earnings has shifted higher- analysts now expect S&P 500 earnings to have grown +9% year-over-year the previous quarter. The increased growth expectations are driven in large part by a belief in the continued growth of investment in technology and alternative intelligence.
This reacceleration of growth expectations has resulted in the mega-cap companies representing a large portion of the S&P 500’s value: the top 10 companies in the S&P 500 make-up 37% of the index’s value, the largest weight since the index was created. The impact of the increased concentration in the top 10 companies can be seen in the difference between the index (+15.3% YTD, S&P 500 TR Index) and the average stock (+5.1% YTD, S&P 500 Equal Weighted TR Index).
There are high expectations for future growth in the top 10 companies of the S&P 500: their contribution to earnings over the last 12 months stands at roughly 27%, compared to a weight of 37%. This is a reminder for investors to maintain a diversified approach; markets such as US small cap stocks and international stocks offer lower valuations with an improving fundamental outlook.
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. The top 10 S&P 500 companies are based on the 10 largest index constituents at the beginning of each month. As of 5/31/2024, the top 10 companies in the index were MSFT (7.0%), AAPL (6.3%), NVDA (6.1%), AMZN (3.6%), META (2.3%), GOOGL (2.3%), GOOG (1.9%), BRK.B (1.7%), LLY (1.5%), JPM (1.3%), and AVGO (1.3%). The remaining stocks represent the rest of the 492 companies in the S&P 500.
What’s on Deck for July?
- Earnings season starts on July 12th; investors expect second quarter earnings to have grown +9% year/year. If earnings growth finishes that high, it would be the strongest quarterly growth rate since 2021.
