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SEI Forward: Second quarter 2024

July 2, 2024
clock 5 MIN READ

Faster, higher, stronger!

The Paris Olympics are due to kick off later this month, and athletes from around the world will gather to compete under the traditional Latin motto of “Citius, Altius, Fortius” or “Faster, Higher, Stronger.” This edition of Forward will look at the current state of capital markets through the lens of the Olympic maxim. 


While the winners of the 100-meter dash will be crowned the world’s fastest man and woman, in markets, nothing kept up with the price action of Nvidia. The center of artificial intelligence (AI) mania added nearly $1 trillion to its market value in the fastest time ever. The chip-maker’s market capitalization rose from $2.26 trillion on May 9 to a hefty $3.25 trillion just 30 trading days later. For context, Nvidia added more than the value of Berkshire Hathaway to its market value in six weeks. The company has grown by over $1.8 trillion (roughly the market value of Amazon) in 2024. The dominance of Nvidia and a few other mega-cap names has quelled hopes of a broader equity market rally. 

While the S&P 500 Index closed out a solid quarter up over 4% and has delivered strong year-to-date performance of over 15%, most other developed equity markets delivered negative performance for the quarter and have fallen even further behind year to date as the big got even bigger.

We continue to view both concentration and valuation as concerning for U.S. equity investors. We believe the current size and future growth expectations of the top names set the bar exceedingly high even for the most stellar companies in the most transformative industries. In addition, while we have been highlighting the relatively low level of broad equity volatility for the better part of a year, we are also focusing on the high level of volatility present specifically in the market’s biggest names. The CBOE Volatility Index or VIX is a forward-looking view of volatility derived from 30-day S&P 500 options. The VIX closed the month at roughly 12.50% which is significantly under the longer-term average of about 16%. The same measure of implied volatility for Nvidia is roughly 4 times the VIX level, at over 50%. Certainly it makes sense for single name volatility to be higher than the market level; however, when one of the biggest companies in the world is trading with such high levels of volatility, this suggests to us that a bumpier ride may be in store for equity investor in the second half of 2024.

Today’s equity market dynamics remind us that diversifying exposures across geographies, sectors, factors and individual companies are as important as ever for investors, and we remain committed to this foundational principle. This is particularly acute for passive investors who, at this stage of the cycle (concentrated and expensive), may want to begin diversifying into actively managed strategies. Speaking of actively managed strategies, as we embark on the third quarter of 2024, we continue to emphasize our preferred factors of value, quality, and momentum with a particular emphasis on value names and sectors. Value spreads—or the difference between cheap and expensive stocks—remain extremely wide and represent a compelling opportunity. From a sector lens, our value exposures tends to favor financials, energy and materials, our momentum exposure leans into Industrials, while our quality exposure tends to be concentrated in consumer staples.

James F. Smigiel

Chief Investment Officer, Investment Management Unit

Important information

Index returns are for illustrative purposes only and do not represent actual investment performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Past performance does not guarantee future results. Diversification may not protect against market risk. 

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. All information as of the date indicated. There are risks involved with investing, including possible loss of principal. This information should not be relied upon by the reader as research or investment advice, (unless you have otherwise separately entered into a written agreement with SEI for the provision of investment advice) nor should it be construed as a recommendation to purchase or sell a security. The reader should consult with their financial professional for more information. 

Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results. 

Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such sources are believed to be reliable, neither SEI nor its affiliates assumes any responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI. 

The information contained herein is for general and educational information purposes only and is not intended to constitute legal, tax, accounting, securities, research or investment advice regarding the strategies or any security in particular, nor an opinion regarding the appropriateness of any investment. You should not act or rely on the information contained herein without obtaining specific legal, tax, accounting and investment advice from an investment professional. 

Information in the U.S. is provided by SEI Investments Management Corporation (SIMC), a wholly owned subsidiary of SEI Investments Company (SEI).

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