Good Morning,
I hope everyone had a great weekend! We have a week full of 90 degree days here in Michigan, with temperatures tomorrow potentially reaching 100!
Markets opened modestly lower this morning as the S&P 500 comes off back-to-back weekly gains. It will be a busy week ahead, although the core market backdrop remains focused on whether AI-related spending continues to translate into measurable economic returns and how ongoing tensions between the U.S. and Iran may influence oil prices and, subsequently, inflation.
From a fundamental standpoint, earnings season begins tomorrow as several of the major banks report results. I will be particularly interested in ASML's report on Wednesday, which should provide one of the first major read-throughs on demand for AI infrastructure. We will also receive the latest CPI report tomorrow, followed by Fed Chair Kevin Warsh's first Semiannual Monetary Policy Report testimony before Congress.
Markets are currently pricing in the possibility of a September rate hike, so it will be important to evaluate both the CPI data and Chair Warsh's commentary. I believe we are approaching a point where corporate earnings could begin to experience a more meaningful slowdown if oil prices remain elevated. Combined with the prospect of a September rate hike, this could lead to increased market volatility in the near term.
That said, I view any market pullbacks as potential buying opportunities, supported by generally healthy fundamentals and the belief that higher oil prices are likely to prove transitory. All things considered, I remain constructive on the market, with a preference for value-oriented opportunities within equities.
Attached is this week's Market Strategy Radar Screen Report from John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management.
Have a great week!