July 26, 2024 – Summer is normally a quiet time of year as families head for vacation and headlines and markets take a back seat. But not this year. As we bake under the suddenly ubiquitous heat domes and global temperatures set records only to immediately break them, the news cycle has been moving so quickly that events that seemed momentous at the time have quickly been forgotten.
Less than two weeks ago, on June 13th, a 20-year-old Pennsylvanian armed with an AR-15 assault rifle legally purchased by his father attempted to assassinate Donald Trump, the soon to be official presidential nominee of the Republican Party. For students of history and for those of us who have lived through a political assassination, it was a chilling reminder of how in a highly polarized political environment, a single individual can change the course of history.
The assassination attempt was followed by an outpouring of support for the former president, including from tech billionaires like Elon Musk and famed venture capitalists like Marc Andreessen, Ben Horowitz, and Sequoia Capital partners Doug Leone and Shaun Maguire. Two days later, Trump chose JD Vance to be his running mate. The reception the two received at the Republican convention seemed to mark a new age for the Republican Party, and victory in the upcoming election appeared increasingly likely.
These events coincided with a shift that began in the market just a few days earlier, with the release of June’s inflation data showing a decline in the Consumer Price Index (CPI), the first since May 2020. The reading seemed to cement the case for interest rate cuts, and stocks began a dramatic shift, with small cap companies gaining momentum, and large cap growth companies, including the Magnificent 7, who have driven stock market returns for the past 18 months, losing their luster. Still, on June 16th, the S&P 500 notched a new record.
But neither the political nor the market sentiments lasted long. On Sunday, the 81-year-old Joe Biden, isolating in his Delaware vacation home after being diagnosed with Covid-19, announced he would drop out of the race for the White House. In less than 48 hours, Kamala Harris appeared to lock up the Democratic nomination with both party elders and would-be rivals lining up behind her. The move rejuvenated a Democratic campaign that had been on the ropes since the presidential debate. The race for the White House was on again.
In the markets, the selloff of the large cap companies continued, led by chipmakers, and ultimately dragged the S&P500 market down from its recent peak. As Q2’s disappointing earnings started to roll in earlier this week, the negative market sentiment increased, dragging all major stock indices into Wednesday’s ‘mini correction’. Political uncertainty joined economic concerns to drive a broad market decline, leaving the S&P500 down 2.3% in its worst day since December 2022.
In the midst of all these events, many of us woke up on Friday, July 19th, to find the world partially paralyzed by an errant software update released by cybersecurity firm CrowdStrike. From India to Alaska, empty planes sat on runways and coffee shops turned customers away as employees stared at blue screens. Beyond the financial damage, which early estimates put at $5.4 billion for Fortune 500 companies alone, the incident was a stark reminder of our global dependence on technologies that are vulnerable to both human error and malice. This is unlikely to be the last technological breakdown to negatively affects our lives, and the next one could be a lot worse—just ask the 15,000 car dealerships who were effectively crippled for almost two weeks by a cyberattack on their CDK management software.
The speed of these events leaves little room for processing, and it will take time for individuals and investors to unpack all that has happened. In the meantime, this period is a good reminder of how fast circumstances can change, and of the importance of aligning portfolios to financial goals. As the elections near, we expect the turbulence to persist. Our focus remains on facts and processes, and we stand ready to assist you with any questions or concerns.
Enjoy the rest of your summer, and let’s hope for calmer days ahead.
— AMD
Market Data Source: Robertson Stephens Investment Office
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