On the Margin Newsletter: Traders rode the AI wave to sky-high returns during H1, but what now?

NVIDIA’s gains alone make up more than a third of the S&P 500’s total returns during the first six months of the year


NVIDIA co-founder and CEO Jensen Huang | jamesonwu1972/Shutterstock modified by Blockworks


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Welcome to the On the Margin Newsletter, brought to you by Casey Wagner. 

We hope our US readers are enjoying a long holiday weekend. Today’s (abbreviated) edition is all about how stocks performed during the first half of the year. 

We’ll see you back here Monday for our regularly scheduled programming. 

AI led US equities to the top during H1, but can they continue? 

If you recall, our Wednesday edition focused on how crypto has performed so far this year. 

Today we talk about stocks, which also had a pretty spectacular run in the first six months of 2024. And unlike crypto, they don’t seem to be losing steam. 

The S&P 500 and Nasdaq Composite indexes gained 14.5% and 18.1%, respectively, during the first two quarters of the year. The Dow Jones Industrial Average lagged behind, posting modest gains of around 4%, but remaining in the green nonetheless. 

Typically, a strong first half means the final six months of the year will similarly post returns. But given the outsized returns of a few individual winners (looking at you NVIDIA), it’s hard to know whether the momentum can continue. 

NVIDIA’s stock posted a 150% gain during the first half of 2024, accounting for more than a third of the S&P’s total returns. Super Micro Computer Inc. was the top-ranking stock in the S&P for the first two quarters of the year, soaring a whopping 213%. 

The question now is whether the AI companies can sustain their rallies. NVIDIA stumbled a bit towards the end of June after becoming the most valuable company in the world, but shares are still up more than 10% over the past 30 days. 

Morningstar analyst Jordan Klein sees more investors moving from semiconductor stocks into software stocks, citing Adobe and Salesforce’s rallies. It’s not a sign semis are in trouble per se, but it’s a trend worth noting, he added. 

The other elephant on the trading floor is, of course, rate cuts. Investors went into 2024 expecting six interest rate slashes. Now, most traders would be happy for just one. 

The Federal Reserve has held interest rates steady for almost a year and central bankers continue to insist that additional data is needed before any decisions can be made. Markets are still hopeful for the first cut to come in September, with Fed Fund futures markets calling for a 66% chance, according to data from CME Group. 

Powell this week was coy when giving remarks at the ECB event in Portugal, declining, of course, to give any sort of timeline. He did however note that central bankers are aware they are treading a fine line. Cutting rates too quickly threatens to derail the progress already made on bringing down inflation, while waiting too long risks losing economic momentum. 

For the first part of the year, though, markets clearly had no issue with the Fed’s policy. We’ll have to see whether traders start to get antsy as we move into the fall. 

Casey Wagner

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