S&P 500 index advances another 8.7% in Q2, ending first half of year up almost 17%.
- Breadth continues to be very narrow – only ten companies contributed over 13% of the index’s return. Over 200 companies declined in the first half of the year.
- Corporate earnings have been relatively flat, meaning the market’s advance has been mostly from companies’ valuations becoming more expensive.
- Fixed income continues to look attractive relative to equities, with investment grade corporate yields in the 5% range.
- Fed funds rate is now over 5%. A year ago it was still below 2%. One of the biggest unknowns moving forward is what the impact will be from the lag effects of the Fed’s aggressive actions over the past twelve months.
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