At halftime of 2024, the S&P 500 is up 14.48% YTD (source: Morningstar), driven by expectations of interest rate cuts and AI enthusiasm. A 29% annual gain for the market is not unheard of, so the second half might see a continuation. However, key risks remain, including valuation, breadth, and inflation. Perhaps a reversal occurs, taking back the 1^st half’s gains. If so, valuation issues would likely resolve and improve 2025 performance. Bottom line, stock market returns are lumpy. Longer term, the return is consistently close to 10% (Source: Dimensional Matrix Book – Historical Returns Data).

Gains have been driven disproportionately by a few large tech companies associated with AI, so a diversified portfolio including international, small and midcap stocks, and even the 493 stocks in the S&P 500 that are not Nvidia, Alphabet, Meta, Microsoft, Apple, Amazon or Tesla, your performance is less than the S&P 500. These 7 stocks comprise more than 30% of the market cap weighted index. Hopefully the market will broaden as businesses adopting AI see upside potential.