As we step into the second half of 2024, one of the prevailing themes in the market since the beginning of the year has been the anticipation of potential rate cuts. Economists had varying predictions, with some forecasting as many as 6 rate cuts for the year. However, as we approach July, the Federal Reserve has yet to adjust rates despite a decline in inflation. The Fed operates under a dual mandate of maintaining price stability (inflation) and promoting employment.

(Source: CME Group)
The current Federal Funds Rate stands between 525 and 550 basis points, with the market forecasting a 95% probability that it will remain unchanged after the July 31st meeting. According to market indicators, the shaded blue area signifies the highest likelihood for future rates. By December 2024, there is a 48.3% probability of rates falling within the 475-500 basis point range, indicating potential for two 25 basis point cuts by the end of the year.
While these probabilities are dynamic, the less discussed metric of unemployment may be pivotal in signaling a rate adjustment. Despite a gradual decline in job growth, the figures still surpass pre-pandemic levels. Monitoring upcoming jobs reports could provide valuable insights into the Federal Reserve’s forthcoming decisions.
Historical Returns after a Strong First Half
Following a strong first half of the year for stocks, we examined historical precedents where the S&P 500 gained at least 10% and analyzed the subsequent performance over the next 3 and 6 months for investors. Since 1950, there have been 23 previous instances of such occurrences, with 2024 marking the 24th instance.

(Source: Carson Investment Research)
The chart indicates that in the past, the third quarter (Q3) saw higher gains 65.2% of the time, while the second half of the year saw gains 82.6% of the time, with an average additional gain of 7.7%. Notably, since 1998, all 12 most recent occurrences have shown positive performance in the second half of the year. Despite anticipated market-focused headlines in the second half of 2024, such as the election, potential rate cuts, and job market conditions, historical trends suggest the possibility of further market gains.
Defense Spending – Reaching New Highs
Global defense spending has reached a record high of $2.44 trillion as international tensions continue to escalate. Despite the unsettling geopolitical backdrop, these conditions could potentially benefit the defense sector. Historical data shows that in election years since 1980, defense stocks have outperformed the S&P 500 80% of the time, particularly in the second half of the year.

(Source: BofA Global Research)
The chart above illustrates the relative performance of defense stocks compared to the S&P 500 on a quarterly basis. Notably, in quarters where defense stocks outperformed, the third quarter typically exhibited the strongest outperformance at +10%. While a robust economy and anticipated future rate cuts could further boost the overall market, it’s important to remain mindful of historical trends when assessing portfolios.
Articles We’re Reading
WTI hits two month high after biggest stockpile draw since Jul-23 (Bloomberg)
Wall Street’s upbeat earnings expectations set high bar for U.S. companies (FT)
NATO allies to pledge €40B for Ukraine amid domestic turmoil (FT)
Dozens of Democratic lawmakers considering demanding Biden drop out of race (Bloomberg)
Market Snapshot
For the Month Ending 6/30/2024 (Cumulative Returns)1

1Source – Morningstar, Inc. Corporate Bonds is presented as the iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds is presented as the iShares National Municipal Bond ETF. High Yield Bonds is presented as the iShares iBoxx $ High Yield Corporate Bond ETF. 10 Year Treasury refers to the valuation of a 10 Year Treasury Note, a debt obligation issued by the U.S. Department of the Treasury. Fed Funds Target represents upper limit of the federal funds target range established by the Federal Open Market Committee. Inflation Rate provided for the purposes of this report by the U.S. Bureau of Labor Statistics. Unemployment Rate calculated by the U.S. Bureau of Labor Statistics. WTI Crude Oil refers to the price of a barrel of West Texas Intermediate NYMEX) Crude Oil. Gold – Spot Price relates to the valuation of an ounce of gold, as traded on the NYSE Arca Exchange. U.S. Dollar refers to the U.S. Dollar Index (DXY). All Returns are denominated in USD (United States Dollar), unless otherwise explicitly noted.
Did You Know?
July is National Ice Cream Month. In 1984, President Ronald Reagan designated July as National Ice Cream Month and the third Sunday of the month as National Ice Cream Day.
The average American eats roughly 20 pounds of ice cream each year, or about 4 gallons. As the summer reaches peak temperatures in July, Americans celebrate National Ice Cream Month as a way to cool off and enjoy the nation’s favorite frozen treat with friends and family. Ice cream has historically been a key feature of American communities. According to an IDFA survey, most ice cream companies are family owned and have been in operation for more than 50 years!
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser
The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.