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Marketers can be forgiven for breaking champagne glasses, even though 2024 isn’t even half way over yet.
US stocks have gone from all-time highs to all-time highs this year: The S&P 500 has surpassed its record a staggering 31 times since January. This equates to a new all-time high about every four trading days.
Investors have shrugged off high interest rates and inflation, a chaotic political and global environment and general economic uncertainty to give markets their best start yet to an election year.
What is happening: Presidential election years are usually good for stocks.
The S&P 500 alone has generated an average return of 7% during presidential election years since 1952, according to LPL Financial. If you limit it to election years in which the incumbent is running for re-election, the average rises to 12.2%.
This year, the index has already far exceeded average earnings. The S&P 500 is up 14.6% year-to-date — the best start to an election year on record, according to Goldman Sachs — and about 31% higher from its October 2023 low. in 4117 points.
So why is this election cycle different from all the others that have gone before?
Profits are typically higher when incumbents run for re-election, most likely because investors desire stability. And this election is the first since 1892 that nominees of both major parties have occupied the White House, notes Ed Clissold, chief US strategist at Ned Davis Research.
If one incumbent reduces uncertainty, then two incumbents really reduces uncertainty. That could advance the typical year-end election relief rally, Clissold said.
A reason to celebrate: Stocks are not only rising, they are rarely falling.
It has been 333 days since the S&P 500 posted a decline of 2% or more, the longest stretch since February 2018, Goldman Sachs’ Scott Rubner wrote in a recent note to clients. His outlook for the second half of the year remains positive – a good first half means a “very good” second half, he wrote.
“The market’s impressive rally continues, notable not only for its strength but also for its stability,” Nationwide’s chief investment research officer Mark Hackett wrote in a note on Friday. “[T]here’s no reason the steady march up can’t continue, especially as we approach the tailwind from election season.”
Last week’s gains were broad-based, allaying some concerns from investors that recent gains have been concentrated in a few big names like technology darling Nvidia, which is up more than 155% so far this year.
The equal-weighted version of the S&P 500 rose 1.12% and the small-cap Russell 2000 gained 0.79% while the tech-heavy Nasdaq was flat for the week.
The steady earnings are causing some analysts to raise their year-end targets for the S&P 500.
Scott Chronert, head of U.S. equity strategy research at Citigroup, raised his year-end target to 5,600 from 5,100 last week.
Analysts at Goldman Sachs, Barclays, Deutsche Bank and UBS also revised their expectations for the broad-based index higher.
Yes but: Market volatility in an election year tends to increase in October, and there are many months left in this cycle with potential surprises to come.
Thursday brings the televised CNN debate between President Joe Biden and former President Donald Trump. “There is plenty of room for big headlines and for candidates to gather momentum or see it reverse,” wrote Deutsche Bank’s Jim Reid.
There is also the prospect of investors getting complacent and starting to take the current bull market for granted.
“The longer optimism remains high, the greater the risk that it will turn into complacency and leave the market vulnerable to future negative news,” said Clissold with Ned Davis Research.
“A fall pullback fits well in terms of timing with possible negative earnings revisions, the timing of the Fed’s decision and election uncertainty. The risk is that one or more of those catalysts prove to be more durable, turned a retreat into something more,” he said.
A global view: The United States is not the only country with an upcoming election. France and the UK will face elections in the coming weeks. While polls suggest the centre-left opposition Labor Party is heading for a comfortable victory in the UK on July 4, the situation in France is far more uncertain and markets have been rattled.
French President Emmanuel Macron called early parliamentary elections after his centrist Renaissance party lost heavily to the far-right opposition in European elections.
The first round of the French elections will be held on June 30, while the second round on July 7.
“Political uncertainty is a short-term drag on both sentiment (reflected through financial markets) and activity,” wrote Katie Nixon, chief investment officer for Wealth Management at Northern Trust, of the upcoming election. Until July, “we can anticipate volatility in European equity and debt markets.”
Alaska Airlines and its 7,000-member flight attendant union reached a labor agreement late Friday, ending more than a year and a half of talks, my colleague Chris Isidore reports.
Terms of the deal have not been released, although the union called it a “record deal.”
The deal is likely to contain a significant pay increase, which has been a common demand across the airline industry and sought by unions, whose members in some cases haven’t seen a raise in years.
In April, the union notified members that it was seeking wage increases of 43% to 56%, depending on seniority, by 2026. Those wage increases would include back wages covering a period dating back a year and a half. provided that they have worked under the terms of the previous contract.
In February, flight attendants from Alaska — along with American, United and Southwest — held unprecedented coordinated walkouts demanding new contracts.
Since then, Southwest flight attendants reached an agreement that included an immediate 22.3% raise as of May 1 and $364 million in retroactive pay.
Meanwhile, flight attendants at American and United are still looking for new deals. American flight attendants have asked to be freed from the restrictions so they can go on strike, but even if granted, there would be a months-long cooling-off period before they could walk out, according to the Railroad Labor Act.
Apple is using upcoming artificial intelligence features to boost iPhone sales especially in China, where demand has stagnated.
But there’s a problem, my CNN colleague Samantha Murphy Kelly reports, ChatGPT — soon to be integrated into Syria — is banned in China.
At a presentation earlier this month, Apple ( AAPL ) showed off its proprietary technology called Apple Intelligence to power its compelling new AI feature and announced a partnership with OpenAI to also use its viral ChatGPT tool in a limited capacity. (When Siri is activated and needs more help answering a question, ChatGPT can step in.)
The move signaled how Apple is trying to get up to speed on the latest buzz technology at a time when tech rivals such as Microsoft, Google, Meta and Samsung have already found their own AI. run. A deal with OpenAI could help Apple close the gap.
But China is one of the first countries in the world to regulate the generative AI technology that powers these popular services. In August, the Cyberspace Administration of China, the country’s top Internet watchdog, issued new guidelines for the industry, requiring companies to seek approval before deployment. The organization has approved more than 100 AI models since March, all from Chinese companies.
According to a report from the Wall Street Journal on Thursday, Apple is looking to a Chinese artificial intelligence company to collaborate ahead of the expected launch of the iPhone in September, but has yet to reach a deal.
Apple did not respond to a request for comment.
The need to find a partner — and quickly — comes at a time when Apple’s smartphone sales fell 10% in the first quarter of this year, according to market research firm IDC, largely due to a sharp decline in iPhone sales. in China. The company has lost momentum in China as nationalism, a tough economy and increased competition have also hurt sales. China is the company’s second largest market.
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