At the beginning of 2024, it was expected that the economy would return to normal following the Federal Reserve's rate adjustments during the pandemic. Now, halfway through the year, after a slow and challenging road, we are seeing signs of stabilization.

In line with this, the major indices have had excellent returns. The NASDAQ 100 leads with a solid 23.2% gain so far this year, while the S&P 500 shows strong growth of 17.3%. The Dow Jones lags behind with a modest increase of 4.4%.

In this Hapi article, we’ll walk you through what happened in the markets during the first half of the year and what you need to know to make smart investment decisions for the remaining half.

Economic Overview

Markets have reached all-time highs due to factors such as strong corporate earnings, advances in artificial intelligence, a low unemployment rate, and positive GDP figures from the U.S. However, risks remain in the second half of the year, including U.S. elections, the war in Ukraine and Gaza, U.S. debt, and the possibility of rising inflation again.

Inflation and Interest Rates

At the beginning of the year, it was expected that the Fed would cut interest rates multiple times. However, inflation data for January and February was higher than anticipated, leading to a lowered expectation of rate cuts. Currently, the Fed only projects one rate cut this year.

Economic Growth

Despite high interest rates, the economy continues to push forward. The Gross Domestic Product (GDP) grew by 1.4% in the first quarter, and it's expected to surpass 2% in the second quarter. Consumers are still spending, and companies continue hiring, keeping the unemployment rate below 4%.

Government Debt

Interest on the federal government's debt is projected to reach $892 billion for 2024, pressuring the Fed to reduce rates and lower federal borrowing costs.

Dominance of Big Tech Companies

The tech giants, known as the "Magnificent Seven" (Nvidia, Meta, Tesla, Amazon, Alphabet, Microsoft, and Apple), have led the market thanks to advances in artificial intelligence.

These companies had a mixed first quarter, with some like Alphabet and Microsoft far exceeding expectations, while Tesla and Meta faced challenges. Nvidia briefly became the largest company in the world by market capitalization, although Apple has since reclaimed the top spot. Looking ahead to the second quarter, Amazon is expected to post strong growth, while Apple could see a decline in annual sales.

Overall, these companies have consistently exceeded expectations, driving the market to new highs.

Conclusions

Despite the challenges, there are many reasons to be optimistic. The market’s resilience has been impressive, and with advances in artificial intelligence and the potential for rate cuts by the Fed, we could see more growth in the second half of the year.

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