Sky-High Earnings, Inflation and Summer Trading: July Stock Market Forecast

Stocks are at a crossroads, earnings are coming in hot, summer trading isn’t so hot and a global stock market crash could be on the horizon: Welcome to this much needed stock market forecast for July 2021.

When I woke up this morning, I felt a little giddy. I don’t know about you, but I’m the type of investor that gets super excited when earnings season rolls around.

An earnings report is how a publicly-traded company reports its financial results over a certain amount of time and how investors gain insight on the financial success of the company.

They’re also crucial for investors and analysts looking to gauge how profitable a company actually is and help determine how much the company’s stock is worth. 

So you already know that I had to wake up bright and early this beautiful Monday morning to jot down a couple of notes on things that might move the markets this week — and I’m not just talking about earnings. 

The Stock Market Forecast for July 2021: Things Aren’t as They Seem

But first and foremost: Earnings! 

We have some major bank companies kicking off earnings season this week. Reports from JPMorgan Chase & Co. (NYSE: JPM), Goldman Sachs Group Inc. (NYSE: GS) and Bank of America Corp. (NYSE: BAC) all come out this week. I expect results to be mixed.

The key to profiting off of these stocks during earnings is to gauge how the stock market rewards big beats and punishes near misses. 

History shows that the market tends to lag after peak earnings growth. Check out this Bloomberg graphic below and see for yourself.

 stock market forecast july 2021

But earnings reports aren’t the only thing hitting the stock market this week. 

On Tuesday, we get the U.S Consumer Price Index (CPI) report for June — a popular inflation metric that measures the average change over time in the prices paid by consumers for goods and services. 

And if you remember April’s CPI report — WOOF — then you know why some investors are nervous about tomorrow.

In April, the CPI for All Urban Consumers rose 0.8% (expectation was 0.2%) on a month-to-month basis, and rose another 4.2% (expectation was 2.9%-3.9%) over the 12 months prior.

That’s a 2.6% rise annually… That’s also the largest year-over-year increase since August 2018… the fastest spike since September 2008… and the biggest monthly gain in inflation since 1981.

The years 2008 and 1981 should ring a bell for some of you. Let’s just say they weren’t great for investors…

Now for June, analysts expect a 0.5% month-over-month increase and a 4.9% year-over-year increase. I expect numbers to be pretty in line with expectations, but if we come in hot —  and I’m talking about us getting a much higher year-over-year number — we could see some fireworks in the bonds market with yields jumping. 

To add more fuel to this fire, Federal Reserve Chair Jerome Powell will talk to the senate on Thursday. But what’s new with that?

I swear, the man loves the sound of his voice as he lies about the rampant inflation in the market. 

The Fed chair does much better with a prepared script, and the back and forth with not-so-friendly senators might lead to a slip of the tongue — where Powell could indicate a much quicker tapering than the markets anticipate.

But we won’t know the full outcome of this meeting for another three days… and the anticipation is killing the stock market.

And guys, you cannot forget that we’re in the midst of summer trading. This means that there is low volume and condition, so cut your trading sizes to match the environment.  

I cannot stress that enough.

Something to pay special attention to during your summer trading is any news bombs of spreading shutdowns from the Delta variant….

Because that can only spell one thing for the economy, and that’s another global shutdown

If you have any questions about the stock market forecast for July 2021, send them to jeff@joyofthetrade.com. And stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.

stock market forecast july 2021 stock market crash coming

Leave a Reply

Your email address will not be published. Required fields are marked *