Dear All,
As you read this article, we’ve entered the second half of the year. Looking back, the three major trends we forecasted back in January—global central banks to embark on a rate-cutting cycle, U.S. economy reaching the best-case scenario, and the manufacturing cycle to return to the growth phase—have all unfolded as expected.
Stock markets worldwide have soared along the way, in line with our earlier assessment of increased odds of bullish outcomes. Many indices hit new highs, and corporate bonds posted strong gains as well. Gold and copper, the commodities we have also been bullish on, even surged beyond our expectations at one point. Meanwhile, government bonds and the U.S. Dollar Index (DXY) saw relatively choppy performance.
With the arrival of the second half of the year, it’s a good time to look back on 1H2024, review and assess how macro factors have shaped market outcomes, and glean the lessons learned.
Three Major Trends Played Out as Expected, Delivering Strong Market Gains
1. Manufacturing Cycle Enters Uptrend, Driving Stock Market High
The key factor driving global stock rallies and new highs has been the manufacturing industry’s return to the upswing phase, as we’ve highlighted earlier this year (note: the manufacturing industry undergoes a cycle every 3-4 years).
As we noted in the past, a cyclical uptrend in the manufacturing cycle is usually accompanied by stock market rallies. That is, equity investments during these periods can almost be considered sure-fire wins. Indicators we commonly reference to, such as the MM Manufacturing Cycle Index, the gap between manufacturing new orders and inventory, and ...
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