Changing Economic Landscape

The latest economic data reveals a shifting landscape with the first-quarter 2024 GDP growth slowing to 1.3%, down from the previous quarter’s 3.4% surge. Personal consumption expenditures followed suit, climbing 2% in 1Q24, compared to 3.3% in 4Q23. Notably, goods spending took a hit, dropping by 1.9% after a robust 3% rise in the previous quarter.

Economic Indicators and Market Performance

Indicators beyond GDP point to a slowdown, with April retail sales stagnant from March and factory orders showing modest increases. Amid these signs, the market continues to exhibit strong sector breadth, with seven sectors keeping pace or outperforming the S&P 500.

Market Forecast and Sector Adjustments

Considering the current economic climate, forecasts for 2024 GDP growth have been revised downward to 1.8%. Looking ahead to 2025, expectations hover around the 2% mark. The market, however, remains diverse and resilient, with sector growth more aligned with market averages compared to previous years.

Energy Sector Outlook

Amid shifting market dynamics, our recommended sector allocations for the third quarter of 2024 reflect adjustments, particularly in the Energy sector. Energy, previously categorized as Under-Weight, has now been elevated to Market-Weight. The stabilization of energy demand, influenced by factors like tempered consumer interest in EVs and a balanced global petroleum supply and demand landscape, has driven this change.

Future Prospects and Market Developments

Looking beyond the immediate future, investors are preparing for a highly polarized upcoming election while also anticipating a potential interest rate cut, marking a significant event amid the post-COVID-19 pandemic era. As we navigate through these shifts, keeping a close eye on sector dynamics and aligning strategies accordingly remains crucial for investors.