Q2 2024 Recap & Analysis

1) Economic Trends/Indicators

GDP Growth

Definition: The Gross Domestic Product (GDP) growth rate measures the increase in economic activity, typically comparing the current quarter or year to the previous one.

Why it Matters

• It indicates the overall economic health.

• A high GDP growth rate suggests a robust, expanding economy.

• A negative growth rate could signal a recession.

Trends

In the first quarter of 2024, the U.S. GDP growth rate was at a mediocre 1.8%, which surged to 3.0% during the previous quarter. This increase was driven by increased consumer spending and a rebound in exports. This marks a significant improvement suggesting a positive outlook for the economy.

Unemployment Rate

Definition: The unemployment rate measures the percentage of the labor force that is jobless and actively seeking employment.

Why It Matters:

• It's a key indicator of labor market health.

• High unemployment rates can lead to lower consumer spending and economic stagnation.

• Low unemployment rates typically reflect a strong job market and economic stability.

Trends

As of May 31, 2024, the U.S. unemployment rate stands at 4.0%, up from 3.8% in March. This increase has resulted in the highest unemployment rate since January, 2022. This is attributed to the steady decrease in jobs created every month, including the fact that the economy created 167,000 fewer jobs in December and January than previously estimated.

"Despite the solid non-farm payroll gain, the details from this jobs report are far weaker," said Scott Anderson, chief U.S. economist at BMO Capital Markets in San Francisco. "Labor market rebalancing is underway as advertised by the Fed, opening the door for a soft-landing for the economy and an initial rate cut around the middle of the year."

Inflation Trends

Definition: Inflation measures the rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Why It Matters:

• Moderate inflation is normal, but high inflation can hurt the economy by reducing consumer purchasing power.

• Low inflation or deflation can signal weak demand and economic stagnation.

Trends

The Personal Consumption Expenditures Price Index (PCE Index), which both we and the Federal Reserve consider the preferred measure of inflation, decreased from a peak of 7.1% year-over-year growth in June 2022 to 2.7% in March 2024. This decline is primarily due to significant improvements in durable goods, energy, and food at home, which accounted for nearly 70% of the excess inflation in 2022. Additionally, supply chain improvements and decreasing housing prices have yet to be fully reflected in the inflation numbers. The PCE Index is expected to drop to 2.1% by the fourth quarter of 2024, with an average of 2.3% for the year.

Consumer Confidence

Definition: Consumer confidence measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation.

Why It Matters:

• High consumer confidence typically leads to increased spending, which drives economic growth.

• Low consumer confidence can result in reduced spending and slower economic activity.

Trends

The Conference Board, a business research organization, reported that its consumer confidence index dropped in June to 100.4 (where 1985 = 100%) from 101.3 in May. However, this decline was not as severe as analysts had anticipated.

“Confidence pulled back in June but remained within the same narrow range that’s held throughout the past two years, as strength in current labor market views continued to outweigh concerns about the future. However, if material weaknesses in the labor market appear, Confidence could weaken as the year progresses,” said Dana M. Peterson, Chief Economist at The Conference Board.

2) Crypto Trends

Overview

With Bitcoin surging over 150% coming into 2024, many believe that this bull run could even continue all the way to 2025, it very well could, being up 38% YTD and reached an all time high in March. On top of that, the crypto market cap is at $2.38 Trillion at the time of being published, not far off from the all time peak in 2021.

Bitcoin

Bitcoin's price saw considerable movement this quarter, starting at $69,000 and reaching an all time high of $72,00 before dipping to $56,000, ultimately ending in $60,000. On April 19, Bitcoin halved for the 4th time in history. A Bitcoin halving is when the amount of Bitcoin that can enter the crypto space at a time gets cut off: it happens every 4 years. A week after the halving Bitcoin, Bitcoin dropped from $67,000 to $62,000. Now, for every block of Bitcoin mined, miners receive 3.125 BTC, instead of the previous 6.25 BTC, worth $190,000 (instead of the previous $380,000)

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Ethereum

The Ethereum ecosystem has made significant strides. We can view this growth in two ways: by examining Ethereum itself and by considering the entire Ethereum system of chains, including its roadmaps.

Ethereum alone has experienced a notable increase in monthly active addresses. The 30-day average has risen by about 30% this year and is only around 10% below its peak in 2021.

When we take a broader look at the Ethereum ecosystem, we also see considerable growth. The chart below shows the aggregated daily active addresses from five leading Ethereum-based chains: Ethereum, Arbitrum, Base, Optimism, and Polygon. These chains were chosen partly because of their vibrant ecosystems with numerous apps and developers building on them.

Defi (Decentralized Finance)

The DeFi ecosystem has seen remarkable growth in the development of decentralized products and services. This includes innovative applications (DApps), decentralized exchanges (DEXs), and decentralized autonomous organizations (DAOs), all designed to improve various aspects of the financial system by removing intermediaries. In 2020, the DeFi sector experienced extraordinary expansion in Total Value Locked (TVL), jumping from under $700 million in January to nearly $16 billion by the end of the year. Currently, DeFi's TVL exceeds $90 billion, with over 3000 DApps operating on the Ethereum network alone. Ethereum, the second-largest cryptocurrency, boasts a market capitalization of over $300 billion, rivaling that of major financial institutions like Bank of America.

3) Major Stock Performance

Market Overview: In Q2 2024, the S&P 500 saw a modest gain of 4.3%, driven by strong earnings in the technology and energy sectors. The Dow Jones Industrial Average declined 1.71%, while the NASDAQ Composite outperformed with a 8.90% increase.

Sector Analysis: The technology sector was the standout performer, buoyed by robust earnings reports from major players like Apple, Microsoft, and Nvidia. The real estate sector, however, faced headwinds due to declining demand for commercial real and office spaces.

Top Performers:

1. Apple Inc. (AAPL):

   1. Apple’s stock surged by 25% last quarter, thanks to strong iPhone sales and growth in its services segment.

   2. The launch of new products and expansion into new markets contributed to this growth.

   3. Analysts remain bullish, projecting continued growth with the upcoming product pipeline.

2. Nvidia (NVDA):

   1. Nvidia’s stock rose by 38% due to high demand for its GPUs, particularly in the AI and gaming sectors.

   2. The company’s partnerships and acquisitions also played a role in boosting investor confidence.

   3. Future outlook remains positive with expected advancements in AI technology.

   4. Despite a negative end to the quarter, investors still remain bullish.

Notable Underperformers:

1. Peloton (PTON):

   1. Peloton’s stock declined by 24%, and down 58% from one year ago.

   2. Losses are attributed to less demand after COVID and a bad cost structure.

   3. Peloton CEO decided to cut 15% of staff, just before his resignation, which even further continued their downward spiral.

4) Global trends & their Impact on Investor Confidence

Geopolitical Tensions:

The ongoing U.S.-China trade disputes have led to increased market volatility, with both countries imposing tariffs on each other’s goods. This has disrupted supply chains, particularly in the technology and manufacturing sectors. Investors are cautious, leading to fluctuating stock prices for companies heavily involved in international trade.

Elections:

The upcoming U.S. presidential election has created uncertainty in the markets. Potential changes in economic policies, such as corporate tax rates and regulatory reforms, have led investors to adopt a wait-and-see approach. Historical data shows that markets tend to be volatile during election years but stabilize once the outcome is clear.

Geopolitical Tensions/Wars

• Ukraine vs RussiaThis conflict has caused a large number of casualties and has become a political issue in Washington. The outcome of the war could determine Europe's future security.

• Israeli-Palestinian ConflictThis conflict has escalated and has had a severe impact on civilians. In October 2023, Hamas attacked Gaza, and Israel destroyed the area, which has led to a new chapter in the conflict. As of April 2024, the conflict has caused an estimated 33,000 deaths in Palestine.

• Sudan Internal ConflictThis war has resulted in thousands of deaths and millions of displaced people. Friction between two Sudanese military factions has brought the country to the brink of collapse.

Investor Confidence

While inflation concerns remain, worries about the market and economy have eased in 2024. In April, investors estimated a 4.8% chance of a stock market decline of 30% or more within the next year. This probability was 0.5 percentage points lower than in December 2023 and 0.6 percentage points below the historical average for our survey. Similarly, the perceived likelihood of an economic disaster—defined as an average annual GDP decline of 3% over the next three years—dropped by 0.7 percentage points to 4.7%. Both components of the Fear and Doubt Index have now reached pre-pandemic levels, indicating a more optimistic outlook.

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