The first half of 2024 was relatively calm for the markets, but we witnessed a notable uptick in volatility this month, especially in tech-heavy indexes and some overseas markets. The S&P 500 has been in the spotlight, with artificial intelligence (AI) driving performance and tech and communication services making up over 40% of the index as of August 1st. You have both direct and indirect exposure to AI in your portfolio. To manage risk, we've been actively rebalancing, so no single position or sector dominates. This profit-taking has been beneficial; when the tech sector weakened, we were able to reallocate into positions we had trimmed earlier.

We believe the U.S. economy remains resilient, supported by job gains, income growth, strong consumer balance sheets and productivity gains. Our view of the economy hasn't changed, but the possibility of the U.S. Fed cutting rates before year-end has become more critical for sustaining growth. We're optimistic about productivity gains continuing to drive expansion and will monitor the numbers closely in the second half.

Weaker than expected U.S. inflation data and recent comments from Fed Chairman Jerome Powell suggest growing comfort with the inflation outlook, increasing the likelihood of U.S. rate cuts this fall. The economic slowdown of recent years has pushed CEOs to focus on cost-cutting, which is now benefiting equity markets through healthier profit margins and strong earnings growth. We're also seeing positive movements in sectors beyond technology.

In Europe, economic activity has improved in the first half of the year. The European Central Bank (ECB) cut interest rates over a month ago and may do so again this fall. We've been increasing your portfolio's exposure to Europe due to attractive valuations.

We've received questions about the upcoming U.S. election. With President Biden not seeking another term, the race is tight, which could lead to increased market volatility this fall. We've reviewed your holdings and are confident in their ability to perform well regardless of the election outcome.  For this reason, we are holding some cash, ready to deploy as opportunities arise. We'll continue to manage risk diligently as new data comes in.