Wall St Week Ahead-Inflation data, presidential debate could sink summer rally
stock markets may be more pronounced this year with inflation jitters and an early presidential debate that have the potential to weigh on a rally that has pushed the S&P 500 near record highs in recent months.
The S&P 500 is up nearly 12% this year on strong earnings and signs inflation may be falling enough for the Federal Reserve to cut benchmark interest rates, but that rally is unlikely to continue in the months ahead, investors said.
Summer has historically been the slowest season for U.S. stocks. The benchmark S&P 500 has risen 56% of the time between June through August, according to data from CFRA Research dating back to 1945. Traders on vacation and investors waiting for fall corporate earnings before committing to next year's asset allocations are often cited as reasons for the summer doldrums.
This summer brings extra headwinds, though, with ongoing uncertainty over the timing of rate cuts and the unknowns of the U.S. presidential election expected to drive some choppiness.
«Markets are pretty richly valued at this point, and everything has to go right between now and July for the Fed to deliver any interest rate cuts,» said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute.
«We don't see a lot of potential catalysts for more gains, so there's a good chance that the seasonal slowdown we typically see will be turbocharged this year.»
Inflation data will be the key driver of the market for the rest of the year, determining the path of Treasury bond yields and
