Markets are in for a 'choppy' second half of 2024

Stocks (^DJI, ^IXIC, ^GSPC) are trading mixed, with the S&P 500 achieving its thirty-third record high of the year. Tyler Ellegard, Gradient Investments portfolio manager, joins Market Domination to discuss hit outlook for the second half of the year.

Ellegard expresses cautious optimism, suggesting that "good times could continue," but warns that the second half of the year will likely be "choppy." He advises investors to adopt a more diversified portfolio approach, cautioning against overreliance on large stocks such as Nvidia.

Ellegard highlights energy, healthcare, and industrials as promising sectors for investment. However, he clarifies that this doesn't mean completely abandoning tech giants: "That doesn't say that we're taking everything off the table from these mega-caps. We still like the Googles, we still like Meta (META), and we still like Amazon (AMZN). We still think there's room to run. But we may just be a little underweight on the Nvidias (NVDA), Microsofts (MSFT), and Apples (AAPL) right now".

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video transcript

Stocks close and mix on this holiday shortened trading day with the S and P hitting its 33rd record high of the year for more on what this means for investors entering the second half gonna bring in Tyler Eligard Portfolio manager at Gradient Investment.

So Tyler, it's good to see you.

Um As my colleague, Jared was just saying, there bulls have been in charge S and P hitting its 33rd record high of the, of the year.

What do you make of that, Tyler?

What do you tell your clients about it?

Do you think the good times continue?

Yeah, I mean, I think generally speaking good times could continue, but the back half of this year certainly gonna be choppy.

Obviously, we, we we're getting a contentious election coming up, who knows who the the candidates are officially gonna be on the, on the Democratic side after the news today.

Um So it's definitely gonna be a choppy second half.

But if you look historically, statistically speaking, second half on a on a election year, presidential election year and on a year, that's been this strong, you typically get decent performance in the back half but I think from a, from a broader perspective, certainly start taking some pro profits on these names that have done well and try and diversify the portfolio a little bit.

We don't need to risk everything on betting, betting it all on NVIDIA right now.

Obviously it's, it's done very well, but I think you get a, a happier client with a more diversified portfolio from the, the top six.

So, what are you diversifying into there, Tyler?

Yeah, you know, I think Energy is a, is a good option right now.

Um We like Schlumberger or SLB as they kind of changed their name a little bit or Sun Core Energy uh Canadian name, those are a couple.

Uh you could look at some of the in industrial side.

So from the infrastructure Bill Crh, a cement company is, is certainly one that we like.

Um but you know, that doesn't say that we're, we're taking everything off the table from these mega caps, right?

We still like the Googles, we still like Meta and we still like Amazon, we still think there's room for to run, but we may just be a little bit underweight on the Nvidia's and Apples and Microsoft's right.

Now.

What about healthcare, Tyler?

I see that in my notes here.

That's also a sector you're bullish on.

We are, we are generally speaking, most of the health care play right now has been towards G LP ones at least for the last call a year and a half.

I do think there's some, some opportunity outside of those names in, in the more the diabetes space dexcom being one of them is, is kind of my top pick right now.

Um Their ability to, to reach from, from just the US market into international markets and the new products that they're bringing on.

You know, I think this company has a pretty strong growth trajectory in front of them.

Um and, and plenty of tail winds behind them.

So I, I think from a uh health care side, that would be the name that I would go with Tyler.

When you take a look at how calm the market's been, really, we've had this absence of volatility now for quite some time, is that going to change with earnings season, do you think that might, could potentially introduce maybe this next wave of volatility leading up to then?

Obviously the election, I do.

Certainly, investors are going to be paying attention to Q two and, and how those earnings go Q four of last year, Q one of this year has been strong so far.

Um earnings revisions have actually been positive, but I think more of the focus is gonna be on the election and, and what those policies are are going to tell us, uh just like Monday, for example, interest rates spiked on, on potential policy actions of, of either party.

So I think yes, Q two is gonna be important but I think sentiment and, and focus is gonna be more towards the election and, and how, and, and diving deep into the policies of, of either candidate and how that's really going to affect the market for the next six months to a year.

Tyler, we, we got through this almost entire interview.

We, we didn't even mention the Fed, um which in itself is kind of interesting.

I mean, d does you as an investor or, or how, how close are you mining the fed?

Whether the FED cuts this year?

Do you think that's, that's critical to whether the market can keep moving higher?

Yeah, look, I think as we entered the year, the consensus was 6 to 7.

We initially thought based on, on our expectations was 1 to 2.

Um data was strong, growth was strong.

Fed was holding tight.

Uh Their, their commentary didn't suggest they were gonna cut.

Now, we've kind of pivot a little bit but we still think we might get one or not.

No cut at all.

Um I know the Fed likes to be apo but I would say that a cut in front of a contentious election that could be construed as, as a political action.

I don't think the Fed wants to get involved in that.

So I think your best bet is probably around December.

And despite all that data has still remained strong on the economic front.

So there really isn't any reason for them to, to make any cuts at this point.

Unless if we do start to see, you know, more deterioration um through September and October Tyler.

When you take a look at some of the expectations here for inflation, we have seen a bit of this disinflationary trend or disinflation trend.

Powell was commenting on it uh earlier this week out of Portugal saying that he has been encouraged by that progress.

What do you think that last mile as the Fed works to get back to that 2% goal?

Is that something that's going to be very tough?

Take a long time, I guess.

How are you evaluating that as you lay out some of those opportunities that you're finding within the market?

It's certainly gonna be tough for them to get to that 2% and and certainly don't expect it to be at 2% by the end of this year.

And, and Paul has even said that.

So for us, what's important is looking at obviously, housing data is, is one of the stickier components.

But then you also do get some headwinds from last year's disinflation and from some of the the uh consumer durables, you know, some they had some negative prints last year.

And so I think there could be some headwinds that could pop up this year.

So I think generally speaking, you need housing to come down or slow, I should say as well as some of the, the energy prices and food prices.

I think that's gonna be the, the biggest headwind um and keeping inflation this sticky.

So it's gonna be a challenge and I don't expect them to get to that 2% target anytime uh this year.

All right, Tyler Eligard.

Great to have you.

Thanks so much for talking with us here.