Capital Markets Outlook: 2Q 2024 (2024)

FAQs

What is the capital markets performance in 2024? ›

The largest shift was in U.S. small-cap stocks, where our forecasts for annualized returns for the next decade range from 5.0% to 7.0% as of June 30, 2024, up from 4.3% to 6.3% as of the March 31, 2024, running of the Vanguard Capital Markets Model (VCMM).

U.S. Markets

Following a rocky start, Stocks finished the second quarter higher as investors remained optimistic the Fed will manage interest rates with inflation trending lower. For the quarter, the Standard & Poor's 500 Index rose 3.92 percent, and the Nasdaq Composite picked up 8.26 percent.

As a whole, analysts are optimistic about the outlook for stock prices in 2024. The consensus analyst price target for the S&P 500 is 5,090, suggesting roughly 8.5% upside from current levels.

Our market summary

Global equities gained 0.7% in the second quarter of 2024. China was the top performing market with a return of 7.1%. This boosted Asian and emerging markets, which outperformed developed markets.

Our baseline outlook calls for an ongoing expansion of the US economy this year, but we expect US real GDP growth to slow modestly from 3.4% annualized in the fourth quarter of 2023 to around 2.0% by the fourth quarter of 2024.

After gaining 26% last year, the S&P 500 is up nearly 20% in 2024 year-to-date. Communication services and technology stocks continue to lead the market, while utilities and financial services stocks are gaining momentum.

The updated Dow Jones price prediction for the next 5 years is for the index to trade around 40,600 points. Long Forecast predicts Dow Jones to trade above 40,000 points in the second half of 2024 and and advance up to 44,000 points by the end of the year.

Vanguard anticipates an additional 0.75–1.25 percentage points of cuts in 2024, to a year-end range of 9.75%–10.25%.

Q2 2024 witnessed a stark market divergence. Mega-cap stocks, fueled by AI enthusiasm, drove S&P 500 gains while small caps faltered. The bond market grappled with challenges in Q2, as rising Treasury yields dampened overall performance.

What was the S&P 500 return in Q2 2024? ›

The strength of the U.S. stock market continued to surprise many investors in the second quarter. The S&P 500 gained 3.9% during the quarter, bringing first-half gains to 14.5%.

With second quarter earnings season having just kicked off, consensus earnings estimates project 2024 Year-over-Year (YoY) earnings growth of around 11% to $244, with second quarter YoY EPS growth projected to be 9%, the highest since the first quarter of 2022.

The Global Economy in a Sticky Spot

Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025. Services inflation is holding up progress on disinflation, which is complicating monetary policy normalization.

Baird's ECM Outlook: 2024 Rebound

With 2023 (and 2022) behind us, 2024 is expected to deliver a more conducive environment for equity offering activity. Many of the headwinds the market has had to combat over the past 24 months have either reversed or are showing early signs of becoming neutral to positive tailwinds.

Consumers and businesses are likely to continue cutting spending and investments ahead, suggesting economic growth decelerated to 0.6 percent annualized in Q3 2024. GDP growth probably will be lackluster in Q4 2024, expanding at a tepid pace of about 1 percent annualized.

Key findings from the 2024 Working Capital Survey

57% expect the economy in their country will improve this year. 24% of respondents say they do not have access to enough liquidity to run their businesses for an entire year. 42% expect higher interest rates to have a negative impact on their businesses.