It’s been pretty smooth sailing for stocks so far in 2024 with the S&P 500 returning over 15 percent and the VIX bumping along at historic lows. And judging from the market's fundamentals, there’s no reason right now for financial advisors to rock the boat in the second half, according to Steven Chiavarone, head of the multi-asset group at Federated Hermes.
“We think the road might be choppier, but ultimately we think it's still a pretty good environment for equities in the second half,” said Chiavarone.
Helping stocks grind higher, says Chiavarone, will be resilient earnings and an economy that will slow, but not slow in a manner that will prove “too worrisome.”
“You have a consumer that is showing some signs of slowing. You have a labor market that's showing some signs of cooling. But it looks like that's all relatively benign,” opined Chiavarone.
Helping equities as well, in his opinion, will be the Federal Reserve’s upcoming actions. Chiavarone sees at least one rate cut this year, which he also believes will change market leadership away from big-cap technology which will have tougher comps going forward.
“There will be easier comps for the rest of the market,” said Chiavarone. “So our big theme for the second half of the year is an equity market that broadens out. And we think there's some wonderful value opportunities there.”
In terms of sectors, Chiavarone believes utilities have the capability to perform in the second half, not just because of their rate sensitivity, but because of a strong secular story as well.
He’s also not too unnerved by the rampant bullishness in the market, primarily because he was never too exuberant in the first place.
“Any time you have a lot of company, I think you feel less comfortable. But unless or until you see a break in these fundamentals, you got to stick with the plan,” said Chiavarone.
“Our view is that we might get a little bit of a pullback over the summer or later this year on some election fears or the like. And we'd be buyers of that because we believe that will wash out a lot of the weak bullish hands,” said Chiavarone.
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