Buzz on Wall Street for rest of 2024 will focus on election, EVs and earnings

Michigan stocks aren't looking at shocking, triple-digit Nvidia-style stock market gains in the first half of 2024. But frankly, gains of 25% or higher in just six months aren't shabby for some Michigan big brand names.

Ann Arbor-based Domino's Pizza stock was up 26.8% for the six months through June 24. Battle Creek-based WK Kellogg was up nearly 29.4%. Detroit-based General Motors stock was up 28.1%.

One outlier: Stock in the tiny, little-known Auburn Hills-based SPAR Group, which admittedly is trading at far less than a $5 value meal at a fast food spot, was up 119.8% for the first six months through June 24. SPAR Group, which offers merchandising, marketing and distribution services to retailers and others, closed at $2.22 a share on June 26. The stock has generated some buzz online by Zacks Equity Research.

After that, though, the stock with the biggest gains was Warren-based Universal Logistics Holdings, up 46% for the six months through June 26. And then Lansing-based Jackson Financial followed and was up 45.3% through the market's close June 26.

Michigan stocks that hit rough patches in the first half included: American Axle & Manufacturing, down 20.2%; Lear Corp., down 18.5%; Visteon, down 15.4%; Rocket Companies, down 4.3%; and UWM Holdings, down 2.2%;

David Sowerby, managing director and portfolio manager for Cleveland-based Ancora Advisors, ran through his list of more than 60 Michigan-based publicly-traded companies.

Not surprisingly, most Michigan stocks overall aren't seeing incredible gains so far in 2024, much like many stocks on Wall Street.

A very strong first half in 2024 is not all it seems

The Standard & Poor's 500 index posted a total return of 15.64% with dividends through the market's close on June 26. Without the mega gains from Nvidia, though, the total return drops to 10.9% for the S&P 500 in the first half, according to Howard Silverblatt, senior index analyst for the S&P Dow Jones Indices.

And the S&P 500's total return through June 26, Silverblatt said, drops to 6.2% without the boost from the so-called Magnificent Seven. The big seven drivers of the market have been Apple, Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia and Tesla.

Many market watchers say the super-sized gains of a limited group of stocks puts a damper on the stock market's overall performance so far in 2024.

"You would think you should give it an A, but I can't," Sowerby said. "I'm being generous giving the market a B."

The spread is extremely wide, Sowerby said, between the performance of the average stock and the major tech winners. Such extremes took place in 2023, 2015 and 1999. "It does happen," Sowerby said.

Overall, though, no major trends seemed to be unfolding for Michigan stocks, which had mixed results so far in 2024, according to Robert Bilkie, CEO of Sigma Investment Counselors in Northville. He noted that Portage-based Stryker, up 14% through June 26, and Detroit-based DTE Energy, up 2% through June 26, had "middling performances."

"There is a lot of hype and enthusiasm around the artificial intelligence space, most prominently Nvidia," Bilkie said. But he noted that Michigan companies overall do not hold a significant role in AI at present.

The Standard & Poor's huge gain in the first half of 2024 is far better than average, though. In fact, as of Thursday morning, it was looking like the first half of 2024 could rank as No. 6 for the best performance in a first half of the year for all years since 1990, according to Sam Stovall, chief investment strategist for CFRA Research.

The best gain on the S&P 500 index was 19.5% for the first half of 1997, he said. The worst first half was in 2022 with a loss of 20.6%. (The figures do not include dividends.)

The first half in 2023 ranked No. 5 with a gain of 15.9% for the S&P 500 index.

"Investors are becoming anxious about a potential reversal of fortune," Stovall noted in his June 26 report. Only 25% of the stocks in the index beat the market in the second quarter, he said. Communication services and information technology sectors provided most of the leadership.

"History offers a bit of encouragement, however, since all top 10 first halves since 1990 rose in price during the second half, averaging 10.8%," Stovall said. The ride up wasn't always smooth, as seven of the 10 years endured declines of 5% or more during the second half.

More:What should investors expect in the stock market in light of the 2024 solar eclipse?

Investors will watch earnings for rest of 2024

During the second half of 2024, Sowerby said, the earnings growth could be stronger for more stocks in the S&P 500, while it trends downward for the so-called Magnificent Seven.

Investors could begin to gravitate toward a broader market at that point, he said.

Profits are likely to grow 10% this year, Sowerby said, and could grow 6% to 8% overall in 2025. "This is going to be a good year for profits and 2025 has favorable expectations," Sowerby said.

The best bet, Sowerby said, may be to keep a laser eye on profits and how companies can create shareholder value.

Everyday 401(k) investors benefited from some gains if their money is an S&P 500 index. But many bond market indexes have been flat so far in 2024, Sowerby said, so gains for some retirement savers could be even more muted.

"It's not a bad year by any stretch," Sowerby said.

General Motors stock a winner so far in 2024

To be sure, some Michigan companies have seen strong gains, including the stock story for General Motors so far this year.

The key turning point for GM stock was last November, Sowerby said, when General Motors announced that it would boost its dividend and initiate a $10 billion accelerated share repurchase program. GM increased its common stock dividend 33%, the company noted, from 9 cents to 12 cents a share in the first quarter. GM will report its second quarter results July 23.

GM closed at $28.89 a share on Nov. 28, before the buyout announcement, but closed out 2023 at $35.92 a share on Dec. 29, up 24.3% in a few short weeks.

GM kept going into 2024 and closed at $48.86 a share on June 12. The stock has pulled back some and closed at $45.77 a share on June 26.

On June 11, GM announced that its board approved an up to $6 billion buyback. The latest new authorization enables GM to buyback more of its shares after completing its existing repurchase authorization.

"To GM's credit, they were generating significant cash flow," Sowerby said. But before the buyback, Sowerby said, GM was focusing more on using its free cash flow on capital expenditures for autonomous and electric vehicles. The long-term EV story remains, Sowerby said, but right now it's been meaningfully diluted by lower consumer demand, cost of materials for batteries, reliability of batteries and other factors.

The EV push for 2024 got ahead of what many buyers want to drive.

"A healthy element of the population still embraces their internal combustion engine," Sowerby said.

A driver facing a four- or five-hour car ride with a family, Sowerby said, isn't eager to try to deal with long stops at charging stations along the way. Many question driving an electric vehicle on family vacations or trips for youth travel teams. "What happens when you have to go to a hockey tournament in Toronto?" Sowerby said.

GM had a "reawakening" if you will, Sowerby said, and announced plans to use a lot of cash flow to grow the dividend and do buybacks. Raising the dividend was key, he said, because many investors view auto stocks as a value stock that offers a competitive dividend yield and, hopefully, can grow the dividend.

GM's ability to consistently grow its cash flow, he said, will likely give the stock more momentum in 2024.

Paul Jacobson, GM executive vice president and chief financial officer, noted in a June 11 statement: "The investments GM made in its brands and product portfolio over the last several years, and the company's operating discipline, are delivering consistently strong revenue growth, margins and free cash flow.

"We are very focused on the profitability of our ICE business, we're growing and improving the profitability of our EV business and deploying our capital efficiently. This allows us to continue returning cash to shareholders," Jacobson said.

GM stock's rally in late 2023 and so far in 2024 are good signs. But it's also important to recognize that GM stock had lagged for so long, Sowerby said, noting that the initial public offering for GM stock was $33 a share in November 2010 after GM emerged from its bankruptcy filed on June 1, 2009.

The stock saw its fits and starts. Back in December 2021, Sowerby said, GM had closed a bit above $63 a share. "And they're still meaningfully below that," Sowerby said.

Morningstar auto analyst David Whiston said GM's stock is benefiting from the buyback as "GM is devouring its stock at an impressive rate."

The stock price has also been driven up, Whiston said, by GM's "strong free cash flow generation and optimism for this year's results." Morningstar has an intrinsic value estimate of $84 for GM and $19 for Ford.

Ford, by contrast, Whiston said, did not do a significant buyback so its stock is not enjoying the benefit of a lower supply of its shares.

"Ford also continues to have up and down results that don’t have the margins GM does," Whiston said. He said Ford could be able to cut their costs one day, possibly, by finally slowing the mass recalls, improving warranty issues and achieving more scale in the Model e business.

"But no one knows when things all come together, which holds the stock back," Whiston said.

Ford Motor Co. stock was up 3.2% this year through June 26. Ford stock closed at $12.11 on June 26.

Wall Street will be glued to debates and presidential election

Of course, the second half of 2024 will include the run up to the presidential election on Nov. 5. The political battle will fuel buzz on Wall Street. Already, pundits have talked about how vital it would be to watch Thursday's presidential debate between the incumbent Democrat President Joe Biden and the GOP candidate former President Donald Trump. Too much drama and uncertainty during the debates are viewed by some as bad news for stocks.

Bilkie said if it appears that Trump had the edge, it's possible that investors might see automotive stocks that have bet big on electric vehicles lose some steam. Energy companies and manufacturers would be expected to do well, Bilkie said, if Trump takes a commanding lead starting with the debate and then goes on to win the White House.

"A Biden win would ostensibly put a further tailwind behind companies that were featured for assistance in the Inflation Reduction Act, such as semiconductor chip makers," Bilkie said.

In general, Stovall said, stocks do well in election years especially when stocks did well at the start of the year in January. That's been the case for the past 80 years.

Stovall said it could be an anomaly, noting that once the old story was that stocks never went down in a year ending in the number 5. Not true, the S&P 500 was down slightly at the end of 2015.

Many times during an election year, Stovall said, candidates make promises that can stimulate the economy, drive up earnings and give some hope.

The 2024 presidential election has its own unique character, including concerns about the health and age of the two leading contenders. Trump is 78 and Biden is 81. And there's a third party candidate Robert F. Kennedy Jr., who is 70.

Stovall said he expected the initial debate between Trump and Biden to be "painful to watch."

"But it's almost like a tongue in a loose tooth, you can't leave it alone. People are going to be tuned in just to see who stumbles," Stovall predicted Thursday morning before the televised 9 p.m. debate on CNN.

Elections can be tough to call, and ditto for some stocks during an election year, maybe, especially during the second half of 2024.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @tompor.