Stock Market Outlook: June 2024 - NerdWallet (2024)

In this issue

What does 'higher for longer' inflation mean for you?

Nearly four years have passed since the inflation rate, as measured by the consumer price index (CPI), first broke above its 2% target in July 2020. Inflation has cooled since then from the wildly high levels it saw in the summer of 2022, but it’s still not back down to earth yet.

Neither are interest rates. The Federal Reserve raised its target range for the benchmark federal funds rate 11 times in 2022 and 2023 in an effort to fight inflation, sending stocks into a bear market and sparking fears of an upcoming recession.

Source: Federal Reserve Bank of St. Louis.

Fortunately, that recession never arrived. Less fortunately, we’re still living in an era of “higher for longer” inflation and interest rates.

On June 12, the Fed is due to announce a new interest rate decision — but the Chicago Mercantile Exchange’s FedWatch tool estimates that the odds of a rate cut are less than 5%.

How long will inflation and interest rates stay high?

No one can predict with certainty how long excessive inflation will last. All we know is that it is still above the Fed’s target level of 2%, and that the decision-makers are willing to keep interest rates high until inflation comes down to that level.

But the last few CPI reports from the Bureau of Labor Statistics (BLS) have not shown a consistent decline in the inflation rate. The March CPI report showed the year-over-year inflation rate jumping up to 3.5%, from 3.2% in February. And then the April report showed an annual rate of 3.4% — lower than March, but still concerningly higher than earlier in the year.

Federal Reserve Chair Jerome Powell has been clear that rates will not come down until inflation is falling more consistently.

“We do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. So far this year, the data have not given us that greater confidence,” he said at a press conference following the May meeting.

What to expect from the June Fed meeting

The Fed won’t just announce a new interest rate decision at the end of the June meeting. It’ll also release a new summary of economic projections (SEP), the first since March 20.

The centerpiece of the Fed’s quarterly SEPs is the “dot plot,” a chart showing Fed officials’ individual estimates of inflation, interest rates and other economic measures in the near future.

The March dot plot indicated that most Fed officials expected the federal funds rate to be lower than its current range of 5.25% to 5.5% at the end of 2024. In other words, they were expecting at least one rate cut sometime this year.

Source: Federal Reserve.

But in light of stubbornly high inflation and Powell’s pessimistic comments, investors will be looking carefully at the June dot plot to see if it still implies that rate cuts are on the way this year.

Managing your money amid high inflation and interest rates

Fortunately, there are some ways investors can potentially take advantage of higher-for-longer interest rates. After all, the interest rates paid by savings products like money market funds and high-yield savings accounts are higher for longer as well.

Interest rates may not be falling in June, but Powell implied in his most recent post-meeting press conference that they probably aren’t rising any more either. With that in mind, bonds may be another investment to consider in the current environment, considering bond prices, generally speaking, move in the opposite direction of interest rates.

The Fed’s rate increases caused a Treasury bond market crash in 2023. But today, the bond market is recovering from that crash, interest rates are probably finished rising for the time being, and the Fed may be due to start cutting them soon-ish. It may be a strategic time to learn how to buy bonds.

Term of the month: Consumer staples stocks

High inflation may well be here to stay — and it may force some consumers to reconsider nonessential purchases. But consumer staples are different, at least in theory. Even when the CPI is off the charts, people still have to get groceries.

Several well-known consumer staples stocks are due to report earnings in June, including:

Source: Nasdaq.com. Data is current as of May 24, 2024, and intended for informational purposes only.

What are consumer staples stocks?

Consumer staples stocks are shares of publicly traded companies that sell “needs.” Those needs include food, consumer products such as toothpaste, and basic clothing and furniture.

The line between consumer staples stocks and consumer discretionary stocks — shares of companies that sell “wants” such as designer clothing and luxury furniture — is blurry at times. Many retailers operate in both sectors at once.

But fundamentally, consumer staples stocks are companies that make most of their money selling things that people can’t live without. And advisors say that they may be more inflation-resistant than other sectors.

“In the case of a broad inflationary environment, core industries like food and medicine would do better, because they tend to be kind of inflation-proof. People still need to eat and see doctors,” says Satoru Asato, a Minneapolis-based certified financial planner.

Top 7 consumer staples stocks by one-year performance

Below is a list of the seven best-performing consumer staples stocks in the S&P 500 index, ordered by one-year returns.

Source: Finviz. Data is current as of May 31, 2024, and for informational purposes only.

How to buy consumer staples stocks

If you’re completely new to investing, you’ll need to open a brokerage account in order to buy consumer staples stocks. Then you’ll need to choose between investing in individual stocks or consumer staples exchange-traded funds (ETFs).

Individual consumer staples stocks have some potential appeal to investors. Many pay dividends, and a few in the table above are outperforming the over the last year.

But if you’re just looking to get some exposure to consumer staples stocks as a hedge against high inflation, you can also consider the more diversified approach of investing in dozens of consumer staples stocks simultaneously through a consumer staples ETF.

Dates that could move markets this month

Economic events

Earnings

Below is a table of blue-chip stocks that are reporting earnings per share (EPS) in June, with the dates and analyst estimates for their upcoming earnings reports, and the results of their previous earnings reports.

We’ve filtered the list for companies with a market capitalization of at least $100 billion. These are high-volume stocks whose earnings reports are often major trading events for options traders and day traders.

Neither the author nor the editor owned positions in the aforementioned investments at the time of publication.