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Q2 Market Recap

Written by Minich MacGregor Wealth Management on . Posted in Posts.

Imagine you were given two pairs of special glasses that were designed to look backward in time rather than forward in space. The first pair can only see how the markets did; the second pair is designed to focus on the economy.

Each would give you a very different picture of how the second quarter went.

The first pair would show you that the markets had their best quarter since 2020. The Dow gained nearly 13%. The S&P 500 rose 14.9%. And the Nasdaq shot up an astonishing 21%!1

The second pair, the one that sees the overall economy, has a less rosy view. In fact, it would show you a picture of an economy in some distress. An economy where the annual inflation rate rose to 4.2% in May, the highest in three years.2 An economy where consumer confidence fell to historically low levels in April and May (although it did rebound slightly in June).3 An economy that may have only grown slightly in Q2 compared to its historical average.4  

Both glasses are functioning properly. Both have the same maker. So why such different views? How can the markets be flying when the economy is grounded, and vice versa?

It’s not hard to understand why the economy had the quarter it did. Turmoil in the Middle East sent a shockwave through the oil and fertilizer markets, causing the goods and services that depend on those things to rise in price. (Think food, gas, electricity, transportation, and more.) By extension, a higher cost of living depresses consumer confidence. After all, it’s hard to feel confident about the future when more and more of your paycheck gets eaten up by simple necessities every month. And when consumer confidence drops, consumer spending drops…leading to slower economic growth overall.

The markets can be a bit harder to parse, but a closer look at what types of stocks performed well can provide the answers. Remember how we said the Nasdaq rose 21%, compared to 14.9% and 13% by the S&P and Dow? Well, the Nasdaq is primarily composed of technology companies. It’s those same companies that powered the S&P 500’s growth. A good example is semiconductor stocks, which surged 87.8% for the quarter.5

Tech companies have been the stock market’s main mover for years now due to the hope and hype around AI, and that story continued in Q2. What’s interesting, however, is that while the story remains the same, the characters inside it have changed. You see, just as the tech sector has been the single biggest propellant of the market, the sector itself has been largely driven by a handful of companies like Alphabet (Google), Amazon, NVIDIA, META (Facebook), Microsoft, Apple, and Tesla. These “Magnificent Seven”, as they are commonly known, have been at the forefront of the AI boom, and it’s their growth that has lifted the overall markets.

But that wasn’t the case in Q2. In fact, the Mag 7 fell during the quarter, and most have been essentially flat or even negative for the year overall.6 Instead of AI companies, investors paid more attention to AI infrastructure. (Again, semiconductors are a great example, as without them, we would lack the raw computing power needed to run AI.) In other words, it’s not the companies mining for gold, but the ones providing the picks and shovels that did well in Q2.

But none of this addresses the question we posed earlier. How can those two pairs of glasses show such diametrically different views?

The answer is a simple but critical truth: The markets and the economy are not the same.

The economy is how much our country produces and consumes. It’s the sum total of everything we make, buy, trade, and use. It’s the economy that drives our daily experiences.

The stock market, on the other hand, represents something far less tangible. It is the sum total of what we think, expect, and, yes, hope will happen in the future. It’s the market that drives our dreams and goals.

Politicians and pundits often like to use these two terms interchangeably, depending on which one makes them look better. Most common is when the markets are used as a stand-in for the economy. That’s because, while the markets are often hard to understand, they are easy to read: They go up or they go down.

As investors, though, it’s important that we remember that each is different and affected by different things. That’s because our feelings about the economy can sometimes color our opinions of the markets. This is largely due to something called status quo bias: The feeling that the current state of affairs will go on forever. When we feel frustrated or exuberant about the economy, it can impact how we invest, and not always in predictable ways.

For example, it’s easy to picture someone who, feeling negative about the economy, lacks confidence in the future and decides not to invest. But economic angst can also cause people to take more risk in the markets. In fact, there is some indication that is happening now. A recent survey found that 80% of Gen Z respondents — people born in the late 90s and early 2000s — often make “high-risk or speculative” investments because they feel financially left behind.7 And the Federal Reserve reported last year that American households now hold an all-time high of 45% of their total financial assets directly in stocks.8

That surpasses the previous record set during the dot-com bubble.  

More stock market participation is generally a good thing, and it’s probably another reason why the markets performed well in Q2. But it can be a red flag when more and more people are taking on more and more risk due to their feelings about the economy.

On the other hand, market exuberance can sometimes make us forget the realities of the economy…realities that may eventually impact the stock market. Higher inflation can lead to higher interest rates. When both become “sticky,” it can prompt fears of a recession, which in turn can drag down the markets. (We experienced this in 2022.) Failing to remember this can also cause investors to start chasing ever higher returns, forgetting all about risk in the process.

The point, is to emphasize that there are two mistakes investors can make when it comes to the relationship between the markets and the economy. The first is to confuse one for the other, or to use one to drive our decisions regarding the other.

The second is to ignore one and focus solely on the other, forgetting that, while they are different, they do have a relationship…and there are times when both can converge.

Remembering this is all the more important after a great quarter in the markets. We cannot predict the future, of course, so it’s quite possible the economy will improve in Q3, and that the markets will continue progressing upward. But when the economy and the markets diverge this sharply, it’s worth asking ourselves whether what we’re seeing in stocks is driven more by hype and speculation than by real, solid fundamentals.

It’s also worth preparing ourselves for that possibility.

So, a great quarter for the markets; a not-so-great quarter for the economy. While we here at Minich MacGregor Wealth Management certainly cheer the former, we will continue watching the latter carefully. After all, that’s what you rely on us for: To keep our glasses on, and our eyes open.

In the meantime, have a great month, and a great third quarter!

1 “S&P 500, Nasdaq register best quarter since 2020 despite Iran war,” Reuters, https://www.reuters.com/business/us-stock-futures-little-changed-strong-quarter-nears-end-2026-06-30/
2 “Consumer prices rose 4.2% annually in May, highest in three years,” CNBC, https://www.cnbc.com/2026/06/10/cpi-inflation-report-may-2026.html
3 “The Index of Consumer Sentiment,” University of Michigan, https://www.sca.isr.umich.edu/files/chicsh.pdf
4 “Current and Past GDPNow Commentaries,” Federal Reserve Bank of Atlanta, https://www.atlantafed.org/research-and-data/data/gdpnow/current-and-past-gdpnow-commentaries
5 “Semiconductor stocks just had their best quarter ever,” Axios, https://www.axios.com/2026/07/01/semiconductor-ai-stocks-chips
6 “Mag 7 value shrinks by $2.3 trillion,” CNBC, https://www.cnbc.com/2026/06/30/magnificent-7-stocks-sell-off-investors-grow-jittery-on-ai-spending.html
7 “Americans’ Finances are Improving – But Some Still Feel Behind,” Northwestern Mutual, https://news.northwesternmutual.com/2026-03-09-Americans-Finances-are-Improving-But-Some-Still-Feel-Behind-and-are-Turning-to-Prediction-Markets,-Sports-Betting-and-Crypto-to-Catch-Up,-According-to-Northwestern-Mutuals-2026-Planning-Progress-Study
8 “Americans have more money in stocks than ever before. Economists say that’s a bright red flag,” CNN Business, https://www.cnn.com/2025/09/28/business/us-stocks-record-highs-american-households

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Q4 Market Outlook for 2024

Written by Minich MacGregor Wealth Management on . Posted in News, Posts.

Our 2024 Q4 Market Outlook: looking back on the 3rd quarter, then looking ahead to what could impact the markets over the next few months.

Image of how the markets did and news impacting the market.

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A Long Expected Rate Cut

Written by Minich MacGregor Wealth Management on . Posted in News, Posts.

In just about every scary movie, there’s always that one scene near the end where the hero thinks they’ve escaped, or that the monster is dead — only for there to be one more “jump scare” in store. 

This is the scenario currently facing the Federal Reserve. 

Over the last two years, the Fed has been trying to do the seemingly impossible: Cool down consumer prices without starting a recession. To do that, the Fed turned to the only tool available to them: Interest rate hikes. Rates began gradually rising in early 2022 and had been at about 5.33% since August of last year.1 That was the highest they’d been in 23 years.1 

Higher interest rates serve as a kind of flame retardant on the overall economy because they make it more expensive for consumers and businesses to borrow money. This, in turn, reduces how much money people spend. Since a consumer spending is a corporation’s income, lower spending forces companies to lower their prices to attract new business. When this happens across the board, inflation will cool to a more manageable level.

This approach works, but the problem is that it’s applying a blunt instrument to a delicate situation. Since 1955, virtually every period of major rate hikes has led to a downturn.1  If prices cool down too much, too fast, businesses stop hiring. Next, they start laying off workers to make up for the decrease in revenue. The economy contracts, and we have a recession. Some of these recessions were very short, but every downturn is painful in its own way. So, bringing down inflation without bringing down the economy? History suggests it can’t be done. 

But the data we’re seeing now suggests that this time, the Fed may have just done it. 

Since the rate hikes began, inflation has fallen from a high of 9.1% in 2022 to 2.5% this past August.2 That’s extremely close to the Fed’s stated goal of a 2% rate of inflation. Meanwhile, the economy has so far avoided a recession. Our nation’s GDP grew by approximately 1.4% in the first quarter of this year, and 3% in the second.3

But in a scary movie, the characters who gloat or celebrate too soon…they never make it out, do they? It’s the ones who keep their heads and don’t get carried away who make it to the credits. 

So, the Fed can’t celebrate yet. Just in case the monster isn’t really dead. 

You see, while inflation has been going down this year, something else has been going up: Unemployment. After falling to a near-historic low of 3.4% in April 2023, the jobless rate has been slowly but consistently climbing. (The most recent jobs report, in August, showed unemployment was at 4.2%.)4 Now, this isn’t a large number. In historical context, it’s quite low. But what matters is the trend, and the trend has undoubtedly been going up. 

Because of these twin factors – declining inflation, rising unemployment — we’ve known for a while that the Fed must begin cutting interest rates. The question was when, and by how much. Well, now we know the answer: September 18, and 0.50%.5 It’s the first cut in over four years, and it brings rates down to a range of 4.75-5%. 

Investors have been waiting expectantly for this for pretty much the entire year. It’s one of the main reasons the S&P 500 has done so well in 2024. So, the move itself wasn’t a surprise. What was a little surprising, though, was that the Fed cut rates by 0.50%. That may not sound impressive, but it’s larger than the 0.25% cut many analysts expected. And it illustrates the new challenge our country faces: How do you cut rates in a way that prevents runaway unemployment without letting inflation climb again?

In other words, how do we ensure the monster’s truly dead? How do we avoid another jump scare?

You see, if the Fed cuts rates by too much, too fast, it could prompt a surge in borrowing and spending. That could overheat the economy and cause prices to spike again, undoing all the progress we’ve made. On the other hand, if the Fed cuts rates by too little, too slowly, it may be too little, too late for the labor market. Unemployment could turn into a runaway train, drawing the economy behind it. The war on inflation would still be won…but at what cost? 

As investors, one of the issues we face is that there’s no reliable way to know exactly what will happen. Right now, the economy appears to contain more positive signs than negative, and this new rate cut is a very welcome development. However, it’s worth remembering that rises in unemployment often precede a recession. Furthermore, many past recessions began just after the Fed began cutting rates, not while they were hiking them. When the Fed announced the rate cut on September 18, they also suggested that further, smaller cuts are in store this year. While the markets have embraced the news, and may well continue to rise, we must be mentally prepared for bouts of volatility as investors parse every bit of data for signs of either rebounding inflation or runaway unemployment. 

Fortunately, we are set up to respond appropriately to any signs of volatility. Moving forward, as the Fed begins cutting interest rates at last, we’ll continue to analyze how both the overall market – and the various sectors within the market – are trending. As you know, we have put in place a series of rules that determine at what point in a trend we decide to buy, and when we decide to sell. This enables us to switch between offense and defense at any time. If our technical signals indicate it’s time to play offense and seize future opportunities or play defense to protect your gains, we can do so without waiting to see what the overall markets will do.

So, as we move into October, we want you to focus on what really matters.  The fall colors.  Pumpkin lattes and pumpkin carving.  Go watch a real scary movie if that’s your thing. 

Are you doing everything you can to help your story contain the words, “Happily ever after”?

Let us help you.  For our clients, we monitor the markets, track the data, and adapt as necessary so they need never worry about jump scares. 

As always, please let us know if you have any questions or concerns. Have a great week!   

SOURCES
1 “Federal Funds Effective Rate,” Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/FEDFUNDS
2 “The Consumer Price Index rose 2.5 percent over the past year,” U.S. Bureau of Labor Statistics, https://www.bls.gov/opub/ted/2024/the-consumer-price-index-rose-2-5-percent-over-the-past-year.htm
3 “Gross Domestic Product (Second Estimate), Second Quarter 2024,” U.S. Bureau of Economic Analysis, https://www.bea.gov/news/2024/gross-domestic-product-second-estimate-corporate-profits-preliminary-estimate-second
4 “The Employment Situation — August 2024,” U.S. Bureau of Labor Statistics, https://www.bls.gov/news.release/pdf/empsit.pdf
5 “Federal Reserve issues FOMC statement,” Federal Reserve Board of Governors, https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm

Open Suitcase image

Q2 Market Recap

Written by Minich MacGregor Wealth Management on . Posted in Posts.

One of our favorite metaphors for investing is that it’s like packing a suitcase.

Let’s say you’re preparing for a summer trip to the beach. What would you put in your suitcase?  A swimsuit, probably. Sandals. Sunscreen. Plenty of shorts and t-shirts. Sunglasses and a hat. Then, when you take a step back, you realize you still have space for a few more items. What do you choose?  More beach gear?  Makes sense – after all, it’s the middle of summer, and your destination is famous for being the perfect place to work on a tan.

Or would you pack a pair of pants and a long-sleeve shirt because you guess it might get cold at night?  Would you tuck in an umbrella and fold up a poncho…just in case it rains?

In our experience, some investors are like the tourist who packs for one kind of weather and one type of activity. To illustrate what we mean, let’s recap how the markets performed last quarter.

When 2024 began, inflation was near its lowest point in two years. As a result, many investors figured prices would continue to drop, and the Federal Reserve would lower interest rates sooner rather than later. (And possibly even several times throughout the year.)  In other words, they “banked” on warm weather and sunny skies, then packed their suitcase accordingly.

Well, there’s nothing more frustrating than when unexpected rain ruins fun in the sun. Instead of falling, inflation ticked up through Q1, rising from 3.1% in January to 3.5% in March.1

As a result, when the second quarter began, the mood on Wall Street had shifted substantially. Suddenly, there was no more talk of the Fed cutting rates early and often. Instead, investors began to wonder if the Fed would cut rates at all in 2024. Some economists even speculated that the Fed might raise rates again. So, investors re-opened their suitcases. Out went the swimwear; in went the coats and gloves. It’s no surprise, then, that the S&P 500 dropped 4.2% in April.2

What these investors didn’t realize was that the sun was already starting to peek out from behind the clouds.

Fast-forward to the beginning of July. Looking back, we now know that inflation dropped to 3.4% in April, 3.3% in May, and a surprising 3% in June.1

A big reason for this slide is due to gas prices, which fell by 3.6% in May and 3.8% in June.3 (Energy prices in general fell by 2% in both months.3)  This helped negate the fact that food and housing prices – two of the most stubborn and volatile drivers of inflation actually went up slightly in June.

As you can imagine, the talk has turned once again…to whether the Fed will cut rates sometime in the summer. This renewed optimism, combined with another factor that we’ll get to, helped lift the markets out of the doldrums. For the quarter, the S&P 500 gained 3.9%, while the Nasdaq rose 8.3%.4  

A 3% inflation rate means that consumer prices are up only 3% compared to this same time last year, not that prices have fallen lower.  Inflation is the rate at which prices are increasing.  A lower inflation rate means that prices are rising more slowly; deflation is when prices actually drop…and it’s usually the sign of an unhealthy economy.

So, what does this mean going forward?  Is it time to repack the suitcase?

The answer is no – because we believe we packed it correctly the first time.

Any savvy traveler knows that when you pack a suitcase, you don’t just factor in what you think will happen. You pack for what could happen. If your goal is to hit the beach, you pack a swimsuit…but since you know it could rain, you also pack a poncho. Your plan is to feel sand between your toes, but if the beach is too crowded, you’ll go for a hike instead…which is why you pack shoes as well as sandals.

The way inflation has gone (up and down) and the way the markets have responded (ditto) shows exactly why investing isn’t about predicting what will happen. It’s about planning for what may happen. You pack a suitcase in a way that ensures your vacation will be fun no matter what. We base our investment strategy in a way that helps you keep working toward your goals, regardless of what short-term market conditions are like.

The fact of the matter is we don’t know whether the Fed will lower interest rates in Q3. Of course, it’s certainly possible that they will. Three straight months of declining consumer prices is certainly a good sign. Even better is that the economy has continued to be solid. (GDP grew by 1.4% in Q1.5 As of this writing, many economists are predicting a 2% rise in Q2.6)  But it’s also possible that a rate cut is still many months away. Trying to guess what will happen in the short-term – and then making moves that could impact you in the long-term – is bad packing.

Then, too, inflation and interest rate expectations are not the only drivers of the markets. Tech stocks – specifically those companies most involved in the development or utilization of AI – helped the markets regain momentum in Q2. Any investor who decided to sit on the sidelines because of pessimism over inflation would have missed out on the optimism surrounding AI. Sure, it’s always a bummer to go to the beach and find it raining…but there are often plenty of other fun things to do on your vacation even when the sun isn’t out

When you think about it, the markets really are like going on a trip. There will always be reasons for enthusiasm and reasons for caution. Everyone who goes to Disneyland can look forward to amazing rides and horrendous crowds. The view from the Grand Canyon is spectacular; the weather can be abysmally hot. The flowers in England are spectacular; the rain can feel oppressive.

And for every factor that can pull the markets down, there will be factors that could push the markets up. Our job is to help you pack a suitcase – and implement an investment strategy with an eye on the long-term forecast – that keeps you prepared for all of it.

So, as we move further into a new quarter, that is just what our team will continue to do. We’ll be keeping an eye on many things this quarter. Inflation, the breadth of the market, the upcoming election – you get the idea. And whenever we feel there’s something on the horizon that could affect the items in your suitcase, we’ll let you know immediately.

In the meantime, if you ever have any questions or concerns, please let us know. And if you have any upcoming summer travel plans, well…be sure to send us pictures!

Have a great week!

1 “Inflation falls 0.1% in June from prior month,” CNBC, https://www.cnbc.com/2024/07/11/cpi-inflation-report-june-2024.html
2 “S&P 500 falls 4.2% in April,” S&P Global, https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/s-p-500-falls-4-2-in-april-as-market-momentum-loses-steam-81466397
3 “Consumer Price Index Summary, U.S. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
4 “Stops dip as investors digest inflation data,” Reuters, https://www.reuters.com/markets/global-markets-wrapup-1-2024-06-28/
5 “Gross Domestic Product,” U.S. Bureau of Economic Analysis, https://www.bea.gov/data/gdp/gross-domestic-product
6 “GDPNow,” Federal Reserve Bank of Atlanta, accessed July 10, 2024. https://www.atlantafed.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf