The first half of the year is in the books, and the market has a very different complexion than it did when Q1 wrapped up. There were double digit gains across most major US indices in Q2, but keep in mind that markets were at YTD lows right at the end of the first quarter. Traders were mispositioned for a de-escalation in Iran and a phenomenal earnings season added to the scramble. To start the quarter pretty much everything rallied but as we moved into May tech took over the leadership position as yields started to move higher despite oil prices topping out. In the middle of the month the tech trade also began to evolve with investors following the money - punishing the hyperscaler AI Capex spending which was devouring their cash flow and moving into the beneficiaries - semiconductor and memory stocks. That continued throughout the month of June as you can see with the nearly 20% outperformance of the ICE Semi Index relative to the NYSE FANG+ during the month. In June the breadth improved with small and midcaps outperforming as healthcare, industrials and financials led the way.

Yesterday in a quiet session with thoughts of barbeques and fireworks entering the collective consciousness the quarter ended on a positive note. There was a risk on tone with defensive/yield-oriented sectors, which had been outperforming recently, pulling back. It was fitting that semis which have outperformed across pretty much every time frame this year led to the upside. Thematic favs were also moving higher with robotics, space and rare earths moving higher though crypto continued to be under pressure with Bitcoin and Ethereum holding just above the YTD lows.

US futures have been modestly lower overnight. About a half an hour ago Bloomberg reported that Meta (+>5%), which has been one of the most aggressive companies during this investment cycle, is forming a new cloud business to sell compute capacity. Semis and memory stocks were modestly lower and have since taken an additional leg to the downside since the report (SMH -2.5%, DRAM -8%). On the flip side of that software has been moving modestly higher (IGV +1.5%). Microsoft is expected to announce another round of layoffs next week. According to Anthropic the Commerce Department has lifted export controls on Claude Fable 5 and Mythos 5 models. S&P, Dow and Russell 2k futures are down ~0.3%.