We are closing with a tremendous gain for the second quarter, with the S&P 500 up more than 13% after suffering a 4.6% loss in the first quarter. NASDAQ has had an even more remarkable turnaround of gaining more than 18% vs a 7% loss in the first quarter. Much of the gains were due to incredibly strong earnings which were powered by tech and AI related investments.

As we move into the lazy days of summer, we typically experience lower volume which often leads to pullbacks in the market. That looks to be the scenario playing out again this year. The recent leaders of this market have lost their edge to the broader market. The new leaders include groups such as financials, healthcare, utilities, industrials, and small caps. Diversification has always been a key ingredient to successful investing. We continue to feel secure in our view of a market broadening out. The recent poor performance of the Magnificent 7 vs the broader market is now bearing this out. Most AI related sectors in the market have had a tremendous rally and are due for a rest (pullback).

Once we get through the summer doldrums, we believe this market will make new highs by year-end. We continue to recommend remaining invested in companies with proven management, solid balance sheets, and strong earnings.