As we transition from June to July, here are important questions for investors to ask:  

• Why is the S&P 500 underperforming? 
• Are oil prices going down?
• What does Q1 GDP data reveal? 
• Will exuberant earnings last? 

In this June market recap, our experts discuss recent market performance and what relevant data reveals about how to invest going forward.  

Stock Market Performance: Why is the S&P 500 Underperforming? 

Why is the S&P 500 underperforming, finishing at –3.1% as of June 25?  More importantly, should investors be concerned?  

The S&P 500 is biased towards big, growth-oriented names. The top names — NVIDIA, Apple, Microsoft, Amazon, Alphabet Broadcom, Micron, Meta, and Tesla — make up about 40% of the index. When those companies underperform (like they did in June), they have a disproportionate impact on the S&P 500 and can create the perception that the market as a whole is doing poorly. In reality, the average stock is performing just fine.  

Case in point: The equal-weighted S&P 500 (which gives the same weight to all stocks, whether a big name like NVIDIA or an average company like Home Depot), saw returns of 1.6%.  

At Credent, we favor a factor profile, which means we lean into portfolio options that are not market-cap weighted and overconcentrated in big names, which could pose a risk to our market footing. This kind of risk management gives clients hope and confidence in navigating the markets.  

Geopolitics: Are Oil Prices Going Down?  

Prior to the initial conflict with Iran and their strikes, average oil prices were around $62/barrel.  

When tensions escalated, the average price jumped to about $92/barrel. The spike in oil prices coincided with a dip in the market.  

Now with some conflict resolution, oil prices are going down (as anticipated in light of their responsiveness), nearing the $62/barrel price from pre-geopolitical tensions.  

What’s the takeaway for investors? Crisis can cause dislocations in the market, but those dislocations are often temporary and shouldn’t lead to rash decision-making. At Credent, we leaned into strategic opportunities, positioning portfolios to take advantage of the oil price dislocation. 

Now, the current leveling is a reassuring sign for the consumer backdrop as we head into the second half of the year.  

Q1 GDP Data: What does this Key Economic Indicator Reveal?  

Finalized Q1 GDP data shows that GDP expanded at a rate of 2.1% annualized, surpassing economist estimates and signaling economic resilience.  

Gross Domestic Product data is comprised of consumption, business investments, government spending, and net exports. In Q1, the biggest attribution to growth was business investments, likely due in large part to companies investing in data centers.  

In contrast, we see consumption, or how consumers are spending money, dwindling. Even still, earnings data does not yet reflect a change in consumption. In fact, it’s quite the opposite.  

Earnings: Will Exuberant Earnings Last?  

Almost all of the company sectors of the S&P 500 beat Q1 earnings expectations.  

For example, in consumer staples (representing companies like Ford and Walmart), expectations for growth were under 8.97%, but actual earnings surpassed that.  

However, exuberance like this cannot continue in perpetuity, and earnings cannot outpace expectations forever.  

We understand this reality, and we are preparing for it over the next 6-18 months. Choosing equal-weighted portfolios instead of cap-weighted ones will position us to take advantage of a future shaped by the companies investing in technology today instead of those currently capturing the profits and exuberant earnings of those investments. 

This expansion of success across the market will likely contribute to volatility in various tech names, but it also represents an opportunity to position portfolios to take advantage of the shift.  

Our investment experts will continue to share the market and economic data they watch as they manage portfolios for performance and risk protection to help clients capture opportunities and achieve their goals. 

For more portfolio insights regarding recent market and economic shifts, reach out to a member of our team using the form below. 

Want more investment news? Watch our latest video on why we chose not to invest in SpaceX at its IPO launch.  

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