Two the Point — Polling Ahead: Market Insights in an Election Year

As we transition into the second half of this pivotal election year, critical trends and data points are driving the investment landscape:

• Top Ten Contribution Impact: The top ten stocks have contributed 77% to the S&P 500’s return through June 30, marking the highest level of influence since 2007 when it was 78.7%.
• Equity ETFs Performance: Equity ETFs recorded their second-best first half ever with over $265 billion in inflows, despite falling short of 2021’s record $356 billion.
• S&P 500 Performance and Forecasts: The S&P 500 closed the first half of the year at 5,464, surpassing the most bullish forecasts and prompting strategists to raise year-end targets to as high as 6,000.
• Sector Leadership: The information technology sector’s valuation multiple is elevated, yet supported by solid earnings expectations, contrasting with the late 1990s dot-com bubble.
• Market Breadth and Rotation: While recent gains have been led by fewer sectors and stocks, a potential rotation from leaders to laggards could broaden the rally, supported by increasing forward earnings across a broader range of S&P 500 companies.
• Fed’s Influence and Market Stability: With consumer price inflation nearing the Fed’s 2.0% target, we think the ‘Fed Put’ is back, suggesting a safety net against potential recession fears and market volatility, akin to the 2018 volatility spike.