Stock Market Theme for 2Q'23

A summary of Steve Sosnick's piece entitled "ChatGPT, Can You Tell Us the Theme for 2Q?" is presented below, sourced from IBKR. The article highlights the key points as follows:

1. The second quarter saw a significant gain for the NASDAQ 100 (NDX), propelled by market-leading mega-cap techs.
2. The S&P 500 Index also saw an increase of over 8%, with mega-caps playing a significant role in this rally.
3. Signs of rotation were observed, with other sectors beginning to participate in the rally and the Russell 2000’s quarter-to-date gains approaching 5%.
4. European stocks posted modest gains after double-digit gains in the first quarter, while the Nikkei 225’s 20% gain was notable.
5. The banking crises that crested last quarter were a significant catalyst for this quarter’s run in the US.
6. The Federal Reserve’s balance sheet expanded by $300 billion due to loans to the banking sector, which provided a jolt of caffeine to markets.
7. The equity market enthusiasm remains in place, even though the balance sheet has returned to prior levels.
8. The upcoming second-quarter earnings season will be a stern test for equities, as much of the current rally, especially in the tech sector, has been in multiple expansions.
9. The author suggests buying insurance instead of taking profits after the stellar rally and ahead of earnings season, as volatility is around the lowest levels seen since February 2020.
10. The author emphasizes that volatility protection, life insurance, can help investors sleep better at night, especially when the value of the assets it protects has appreciated over time.

Source: InteractiveBrokers