Netherlands-based ASML Holdings N.V. provides advanced semiconductor capital equipment solutions. ASML manufactures ultraviolet lithography systems critical to the production of integrated circuits. The company, based in Europe's top technology hub near Eindhoven, has operations in Europe, the Americas, and Asia, and employs 33,000 people. The company supplies both primary semiconductor companies such as Intel and Samsung as well as merchant foundry companies such as Taiwan Semiconductor. Together with its partners, ASML is driving the development of more affordable, more powerful, and more energy-efficient chips and devices.

Cautiously Positive Outlook as Election Season Heats Up The stock market was in solid shape at mid-year 2024 and has continued to build on gains in July, which is typically the best summer month for equities. The rally has withstood signs of weakness in consumer spending, a tepid industrial economy, and slowing in employment; it even shrugged off an assassination attempt on former president Trump. The big market driver has been anticipation of cuts in the fed funds rate by the U.S. Federal Reserve. On 7/15/24, Fed Chair Jay Powell appeared to signal a willingness to begin the rate-cutting process before the U.S. reaches the targeted 2% inflation rate if the employment economy were to send worrisome signals. The Fed Chair said he 'won't be sending signals regarding any particular meeting,' but Wall Street will be stunned and disappointed if the Fed does not cut rates at its September FOMC meeting. Market Outlook for 2024 In 2023, the stock market broke out of its 2022 funk on the perception that inflation was in retreat, the Fed would wrap its rate-hiking campaign, and the supply chain would get back to its own 'new normal.' All of those things happened more or less, and the market rallied as anticipated. Whereas 2023 opened with inflation and the Fed rate-hiking campaign clearly on the downslope, the outlook for 2024 remains less clear even halfway through the year. The stock market is again rising to new all-time highs, yet the foundation of the advance seems tenuous. The stock market has had a big run, partly because corporate earnings are rebounding from a year of negative comparisons. While equity valuations appear attractive, stocks will appear pricey if earnings fail to grow as anticipated. The major geopolitical event of 2023 - the war between Israel and Hamas - has continued into 2024. In European nations such as France, nationalism is vying to displace leadership from traditionally socialist parties. Well after the end of pandemic lockdowns, China continues to experience uneven economic recovery that economists now recognize as demographic as well as cyclical. Despite these and other challenges, the global macro-environment appears moderately positive for U.S. stocks. Measures of the commercial and industrial economy - including PMIs, durable goods orders, industrial production, and small-business confidence - have moderated from high readings in the pandemic-recovery phase, while remaining at levels consistent with low-level growth. The lagged effects of higher rates are dragging on consumer and business spending and confidence. Recession appears unlikely, but could again become a risk if consumers stop spending. The outlook for the consumer economy is mixed. Rising wages and full employment are not sufficient to fully offset high prices and high interest rates, which are constraining everything from food purchases to home sales. We expect the U.S. economy to continue expanding in 2024, remaining on a narrow growth path in line with subdued population growth and higher productivity. Following 2.5% GDP growth in 2023, GDP growth is expected to moderate in 2024. Our forecast calls for sub-2% economic growth in the middle quarters of year and 2%-plus growth in 4Q24. For all of 2024, Argus is modeling 1.7% GDP growth, compared to 2.5% in 2023. Our forecast for 2025 is in the 2.0% range. The Fed is now ahead of the inflation curve: the federal funds rate remained at 5.25%-5.50% as of midyear 2024, while the core PCE Inflation Index was up 2.6% on an annual basis. With the FF/PCE gap now around the target range of 250 basis points, the Fed may feel increasing confidence in its ability to begin reducing rates. Inflation trends were more important than GDP trends for the stock market in 2023; their impact has started to fade as 2024 progresses. The new concern is that the long-beleaguered consumer has cut back on spending, particularly for durable goods. That could push the economy into a slow-growth phase or even recession. The spending disconnect appears to be growing between the generally older and more-prosperous top of the economy, and the generally younger middle- or bottom-cohort of the economy. Consumer sentiment and consumer confidence also show signs of splitting along generational and affluence lines, with confidence and sentiment rising in high-income consumers above 55 years old and declining for less-well-paid Millennials. June nonfarm payrolls along with prior-months revisions signal some cooling in the employment environment. The June unemployment rate of 4.1% was just one-tenth away from triggering the Sahm rule, considered a reliable recession indicator. In setting policy, the Fed is presumed to focus exclusively on achieving its 2% inflation target. Yet Chair Jay Powell in mid-July reminded Congress and investors that the Fed looks at 'both sides of its mandate,' including using policy to maximize employment. We believe pressures on the middle class and lower tiers of the economy may figure in the Fed's rate policy decision-making, particularly if the jobs economy were to continue to soften. As of mid-July, the CME FedWatch tool forecast a nearly 90% probability of a quarter-point rate cut at the September FOMC meeting. In a sign of increasing investor optimism, the FedWatch tool signaled a nearly 60% probability that the Fed funds rate would be 75 basis points lower at year-end 2024 than at present. We look for the dollar to continue to ease in 2024 from the cycle-high levels set in 2022, particularly if rates start to come down late in the year. The greenback increased 2% in 2023, yet still remains below the 2002 cycle high and generally has been trending lower since October 2023. Energy prices have been volatile: rising in fall 2023, declining in winter 2024, and rising again in spring 2024. We look for reasonable balance in the supply-demand equation to keep energy prices relatively stable. West Texas Intermediate (WTI) crude was at $83 per barrel at mid-year, roughly in line with 1Q24-end. Our forecast average price for WTI crude oil in 2024 is $80, in line with the 2023 average and down from $95 per barrel in 2022. The yield curve was inverted for all of 2023 and remained so for the first half of 2024. Fixed-income investors expect the Federal Reserve to start cutting rates but to proceed slowly: perhaps two cuts in 2024, and two-to-three cuts in 2025. We expect investors to push shorter-term interest rates lower over time, eventually returning the currently inverted yield curve to its normal upward slope. Following as-expected 1Q24 earnings, we maintained our 2024 estimate of S&P 500 continuing operations earnings of $247. Our estimate implies 9% growth from 2023, when S&P 500 earnings grew just 2%. Our EPS forecast for 2025 is for continuing-operations EPS in the mid-$260s, also implying high-single-digit growth. We expect U.S. stocks to continue outperforming global stocks, based on risk profiles and growth potential, tempered by valuation. In terms of market segments, we look for growth to continue to lead in 2024. We also continue to expect improved sector breadth as investors take profits in AI names and as rate-cut optimism lifts the broad market. Despite solid appreciation over the past year and a half, our stock valuation model remains favorable as earnings growth accelerates and as inflation and interest rates continue to come down. Our base case outlook for U.S. markets calls for the S&P 500 to appreciate an additional 5% across the second half of 2024. The year-end outlook remains uncertain in a presidential election year (typically the weakest of the four-year cycle). We anticipate that an expanding economy, growing earnings, and declining inflation and interest rates can offset the political uncertainty from the presidential election, resulting in the S&P 500 trading at or near all-time highs in 2024. Conclusion Our stock/bond valuation model suggests that bonds are slightly more favorable than stocks, although the difference is minor and stocks are still attractive. Our modified earnings-yield model takes into account earnings growth, short- and long-term corporate and Treasury fixed-income yields, inflation, and other factors. The output of our model is expressed in standard deviation to the mean, or sigma. The long-term average going back to 1960 is a sigma of 0.16, with a standard deviation of 0.97. Currently, stocks trade at a slight premium valuation of 0.19 sigma, in line with the long-term norm. Within our modified earnings-yield model, the decline in interest rates and the slowing in inflation along with our forecast for earnings acceleration have kept stock valuations from soaring out of sight during this one-and-a-half-year stock rally. The 2024 forward P/E is about 20-times S&P 500 continuing operations earnings, within a long-term range of 13- to 24-times. Digging a little deeper, we note that the current yield on the S&P 500 is around 1.3%, at the low end of the 10-year range of 1.3%-2.3%. However, the gap between the S&P 500 dividend yield and the 10-year Treasury yield is around three-quarters of the normal discount, signaling value. Given the current yield along with our forecast for high-single to possibly low-double digit EPS growth for 2024 and 2025, the total-return outlook for the S&P 500 is better than it has been since pre-pandemic days. As inflation and interest rates come down further in the 2024 second half and in 2025, we expect our stock/bond valuation model to tilt more toward stocks. Our year-end 2024 target for the S&P 500 is 5,800, and our trading range is 5,200-6,200.

ASML is the leader in photolithography systems used in the manufacturing of semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photo mask onto a semiconductor wafer. The latest technological advances in this segment allow chipmakers to continually increase the number of transistors on the same area of silicon, with lithography historically representing a high portion of the cost of making cutting-edge chips. ASML outsources the manufacturing of most of its parts, acting like an assembler. ASML’s main clients are TSMC, Samsung, and Intel.

Biogen and Idec merged in 2003, combining forces to market Biogen's multiple sclerosis drug Avonex and Idec's cancer drug Rituxan. Today, Rituxan and next-generation antibody Gazyva are marketed via a collaboration with Roche. Biogen also markets novel multiple sclerosis drugs Plegridy, Tysabri, Tecfidera, and Vumerity. In Japan, Biogen's MS portfolio is copromoted by Eisai. Hemophilia therapies Eloctate and Alprolix (partnered with Sobi) were spun off as part of Bioverativ in 2017. Biogen's newer products include Spinraza (SMA, with partner Ionis), Leqembi (Alzheimers, with partner Eisai), Skyclarys (Friedreich's Ataxia, Reata), Zurzuvae (post-partum depression, Sage), and Qalsody (ALS, Ionis). Biogen has several drug candidates in phase 3 trials in neurology-related fields.