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Weekly Market Recap | 6/10/24

What happened last week

  • AI Theme: NVIDIA (NVDA) rally to $3T in market capitalization vaults U.S. large caps to fresh all-time highs.
  • Strong Payrolls Data: Nonfarm payrolls painted a picture of a strong labor market, surprising against the recent soft prints on other consumer-related metrics.
  • European: Far-right gains and surprise French elections overshadowed the first European Central Bank cut since 2019.

What we’re watching this week

  • Domestic Data: Inflation update, consumer sentiment; on the micro front, Apple’s annual developer event expected to unveil a new “AI iPhone.”
  • Monetary Policy: FOMC policy meeting with economic projection and dot plot updates; the BOJ policy meeting is also important for levels of global yields.
  • Geopolitics: Investor reaction to EU parliamentary elections, and a possible Israeli escalation with implications for global energy markets.

Horizon’s Investment Management Views

NVDA once again outperformed last week, driving slightly more than half of the total U.S. large-cap equity return over the past week and eclipsing, for a moment, the $3T market cap mark for the first time. NVDA CEO Jensen Huang doused the stock in jet fuel during his energized presentation at the annual “Computex” chipmaker conference in Taiwan. Today’s 10:1 stock split, which will likely re-engage some “priced out” retail investors and may drive additional option activity, also probably drove some strength. Domestic large-cap equity indices set fresh all-time highs last week on the strength of NVDA and other mega-caps.

Outside of the AI colossus that has driven more than 1/3rd of U.S. large-cap stocks’ YTD return, there were other things that happened last week (believe it or not). A stronger-than-expected jobs report surprised investors following a string of soft prints across consumers’ confidence and consumption behavior. Over the weekend, the strong showing from the far-right in European Parliamentary elections weighed on the Euro in early Monday trading and more than erased the gains from the “hawkish cut” delivered by the ECB last week. Calls for a snap election from the French President saw some French banks sell off roughly 10% and peripheral yields surge; we expect more European asset market volatility through the first election date at the end of this month.

Looking to the week ahead, May’s U.S. CPI release and the FOMC meeting both fall on Wednesday in what is likely to be a predominantly macro-driven week. While the Fed is not moving rates at this meeting, we will focus on guidance for 2024 cuts and Chairman Powell’s press conference. Outside the U.S., we will continue to monitor the fallout from the European elections and a meeting with the Bank of Japan. Geopolitics also remains in the news, with a particular focus on a potential escalation on Israel’s northern border and read-throughs to energy and inflation.

The Federal Open Market Committee, or FOMC, is the Fed’s chief body for monetary policy. BOJ stands for Bank of Japan. The European Union (EU) is a unique economic and political union between 27 European countries. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The European Central Bank (ECB) is the central bank of the European Union countries which have adopted the euro. The commentary in this report is not a complete analysis of every material fact with respect to any company, industry, or security. The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward-looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index, which is a market- capitalization-weighted index of the 500 largest U.S. publicly traded companies. Large Caps are represented here by a broad-based large cap index; contact us for more information References to indices or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC. © 2024 Horizon Investments, LLC.

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