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June Market Expectations Report

The Ivory Hill RiskSIGNAL™ has been green since December 5th. Currently, our short-term volatility signal is green, while the medium-term signal remains red. Since the medium-term signal has been red since the end of March, we are approaching a crucial decision point. This prolonged red signal could either be a false alarm or indicate an imminent significant market downturn, as it usually doesn't stay red for this long.

June Market Expectations Report

The June update for the Market Expectations Table reflects a simple fact: While risks to this rally continue to build, mostly in the form of a potential economic slowdown, the environment for stocks has improved over the past month. This is due to three main factors:

  1. Inflation resumed its decline.

  2. AI-related tech earnings were very strong.

  3. Fed rate cut expectations rose.

As a result, there are several changes to the June Market Expectations Table.

Firstly, "Hard Landing vs. Soft Landing" is now the most important market influence. "Inflation" has been removed as a market influence because the June CPI report and Fed meeting have shown that:

  1. Inflation is once again declining.

  2. The Fed is going to cut rates in 2024; the only question is whether it will be in September or December (and this difference is not very important in the short term).

I could end up eating my words on inflation, as I have seen several non-Wall Street CPI projections showing inflation accelerating into year-end. Remember: I write this monthly piece on how the market views the data, not Kurt's thoughts.

The market now assumes falling inflation and Fed rate cuts, meaning these factors are no longer substantial market influences—they are already expected. The bigger questions are:

  1. Is inflation falling because growth is slowing significantly? (If so, that's bad.)

  2. Will Fed rate cuts be enough to stop a loss of economic momentum?

The focus is now on growth, which is why it is the most important market influence going forward.

I have also reintroduced "AI mania" as a market influence because strong earnings from companies like APPL, ORCL, and AVGO last week largely prevented the S&P 500 from declining. Additionally, the return of AI enthusiasm is helping to make the historically high S&P 500 valuation more "justifiable" to investors.

Finally, due to the positive events of the past month and the reintroduction of AI enthusiasm, I have increased the "Market Multiple" for the current situation to 21X and for the "Best Case" to 22X to reflect the market's current favorable conditions.

Current Situation:

The prevailing economic environment suggests that a soft landing remains more probable than a hard landing. Remember: this is what the data is telling us not my opinion. The Federal Reserve is expected to implement one or two rate cuts this year. Enthusiasm for artificial intelligence (AI) continues to surge, and geopolitical risks remain elevated. The current market environment broadly supports stock performance and justifies high market multiples. However, it is important to note that the present market valuation assumes a scenario with negligible risks. In reality, this rally has numerous potential risks over the medium and long term. While the short-term outlook for stocks has become more positive over the past month, the market remains aggressively valued given the current macroeconomic landscape, increasing the risk of a sudden and sharp market pullback.

Conditions Improve If:

  • Economic Data continues to support market confidence.

  • The Fed confirms a rate cut in September.

  • Persistent outperformance in earnings by AI bubble-cap companies.

  • Market Implications: This scenario would create an ideal environment for stocks characterized by:

  • Solid economic growth, preventing any slowdown.

  • Upward pressure on earnings expectations driven by AI stocks.

  • Anticipated near-term rate cuts.

  • Diminishing geopolitical risks.

Even if this optimal environment justifies a 22x market multiple (which is debatable), it is already factored into the current market valuations, reflecting the rampant optimism inherent in the S&P 500 at these levels.

Conditions Get Worse If:

  • Economic Data is slowing enough to undermine market confidence.

  • The Fed pushes back on a September rate cut.

  • AI-related tech companies miss earnings expectations.

  • Rising geopolitical risks would further strain the market environment.

This scenario would fundamentally undermine the assumptions that have driven the rally from October to the present. Given the current extremely optimistic market pricing, the net result would likely be substantial declines in stock values. A retracement of much of the gains since October is possible, which could mean a decline in the S&P 500 to the mid-4,000s. While this outcome might seem unlikely due to still-elevated valuations, it is not set in stone and remains a legitimate risk if economic data turns unfavorable.

Looking ahead, I expect this market to become increasingly difficult to read as the election approaches.

And remember - The one fact pertaining to all conditions is that they will change.

Feel free to use me as a sounding board.

Best regards,


Schedule a call with me by clicking HERE

Kurt S. Altrichter, CRPS®

Fiduciary Advisor | President


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