When the colorful Ed Koch (remember him?) was mayor of New York City, he often asked passers-by on the street: “How’m I doing?!” Koch’s famous question came to my mind, as the financial markets reached this year’s halfway point.

When a landmark such as the end of the first six months occurs, it’s human nature to evaluate one’s progress. As of this writing, the answer for investors is: We’re doin’ good.

The stock market thrived in the first half of 2024, amid generally good news on the economic front and the tantalizing hint of a Federal Reserve interest rate cut. Historically, when the first half is strong, the rest of the year tends to be above average too.

With the first half behind us, let’s examine the leaders and laggards, and what the trends portend for the second half.

Mega-cap technology stocks continued their reign, buoyed by the artificial intelligence (AI) mania that refuses to quit. Meanwhile, traditionally defensive sectors such as utilities and gold also had a stellar start.

Volatility took a back seat in the first half of 2024, as market swings remained modest. Small-cap equities struggled and underperformed their larger counterparts, due to elevated interest rates and slowing economic momentum.

For small caps to bounce back, we’ll need to see easing Fed policies and a pick-up in economic growth. It might take a bit longer, but the groundwork for a small-cap resurgence is there.

Last Friday, the S&P 500 finished the second quarter of 2024 with a gain of 3.9%, setting a new all-time high.

For the first half of 2024, the main indices gained as follows: the Dow Jones Industrial Average +3.8%; the S&P 500 +14.5%; the NASDAQ +18.1%; and the Russell 2000 +0.46%.

The S&P 500 in H1 racked up one of the top-seven best starts in the last 35 years, setting more than 30 new record highs year-to-date. Here’s a sector-by-sector breakdown of H1:

While it’s unlikely we’ll see the same robust rise in the second half, there’s a solid foundation for continued gains, largely due to an impending Fed rate cut and rising corporate profits. Investors should be optimistic but temper their expectations for more moderate gains.

If you enjoy dramatic market swings, 2024 must have been a snoozefest. The CBOE Volatility Index (VIX), the so-called “fear index,” hit its lowest daily reading since 2019. The first half’s biggest equity pullback was a mere 5%, which barely registers on the market Richter scale.

Calm markets don’t necessarily precede a storm. We could see a bit more volatility thanks to geopolitical uncertainties and election jitters (oy, how about that weird and dispiriting Biden-Trump debate!). However, dips should be viewed as buying opportunities. As for politics, over the long haul Wall Street really doesn’t care about red and blue…only about green.

AI enthusiasm shows no signs of slowing down, with mega-cap tech stocks reaping the benefits. The “Magnificent Seven” saw an average gain in H1 of 39%, with shares of chipmaker Nvidia (NSDQ: NVDA) skyrocketing around 150%. Nvidia has added $1.8 trillion of market cap year-to-date. Meet Wall Street’s new alpha male: Nvidia CEO Jensen Huang.

The AI hype isn’t going away. While the tech sector’s valuations are high, the growth potential remains strong. Other sectors might play catch-up, but tech will continue to be a major player. The same optimism applies to communication services, the top performer in H1, as media integration, AI and the roll-out of fifth generation (5G) wireless provide a long-term tailwind.

That said, market breadth is healthy. I accurately predicted earlier this year that market gains would broaden to include defensives and I still believe in this rotation. With a slowing economy and potential Fed easing, defensives should continue to perform well.

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This article previously appeared on Investing Daily.