Collecting Shoe Donations | New Highs, Big Questions

So much for the lazy days of summer. With two quiet weeks on the economic data front, markets have quietly (but confidently) moved to new highs with a backdrop of stable and improving economic conditions and a strong start to Q2 earnings season, as shown in the chart of the week below.

Q2 EPS Off to a Strong Start

Alphabet contributed to the positive earnings backdrop last week, which added to the positive momentum in AI-related companies and expectations after a stronger-than-expected earnings report. But, like an ever-approaching “heat wave” in the summer, this week brings an onslaught of economic data and key policy meetings from major central banks.

Employment data out in the U.S. throughout the week will be a focus for investors, but not to be overlooked by an FOMC meeting on Wednesday. With Jerome Powell under recent pressure from the Trump Administration to cut rates, and now under the added pressure of renovation costs, any action (or inaction) by the Federal Reserve will be scrutinized for its direct connection to the state of the economy and future expectations.

In addition, markets will get the most recent check on inflation with the release of PCE and the University of Michigan Inflation Expectations.

The progress made in the last several weeks related to trade deals by the U.S. appears to have eased worst-case scenarios related to inflation expectations, with markets responding positively in parallel.

And lastly, this week also brings earnings reports from 4 of the “Magnificent 7” companies in the S&P 500, providing further commentary on the state of AI spending and demand.

And like the last vestiges of a summer vacation coming to an end, the doldrums have come to an end ahead of a critical week of data and earnings.