Wall Street Week Ahead: After first-half rally, stocks' July winning streak on the line
The S&P 500 defied recession fears and a U.S. banking crisis to notch a 15.9% gain in the first half. The Nasdaq Composite powered ahead 31.7% for its biggest first-half increase in four decades.
Investors betting the upward trend will continue over the next few weeks have recent history on their side. The S&P 500 has posted a positive return in eight consecutive Julys, and the tech-heavy Nasdaq 100 index has climbed in July for 15 straight years. «We have had a pretty resilient market in the first half of this year,» said Mona Mahajan, senior investment strategist at Edward Jones.
«The market needs one big question answered, and that is what does the economy look like in the back half of the year.» Several indicators show growing optimism about equities. Positive sentiment in the American Association of Individual Investors survey has come in above its historical average for four straight weeks, while positioning measures tracked by banks have shown investors recently increasing their exposure to stocks. The Cboe Volatility Index, which measures investor demand for protection against stock swings, recently hit its lowest level since early 2020.
At the same time, July brings its share of potentially market-moving events. First up is next Friday's U.S. employment report, which will give investors a snapshot of how the economy is faring after 500 basis points of rate hikes from the Fed since last year, its most aggressive tightening in decades.
Signs of continued solid job growth could reinforce a view that has helped boost markets this year: that the U.S. economy can avoid a severe recession despite the Fed's tightening. «The labor market is probably going to end up proving to be the big catalyst for what may happen
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