As we head into July and the second half of the year, the U.S. stock market continues to benefit from the strong momentum established in the first half. Despite ongoing concerns about inflation, interest rates, and the never-ending wars in the Middle East and Ukraine, the markets have demonstrated tremendous resilience. Corporate earnings have remained strong and consistent, and investors have continued pouring money into technology and artificial intelligence.
This chart of the $QQQ shows recent market volatility. The US Markets are still technically in an uptrend, but volatility has increased, and we need to stay above $700 on the $QQQ. A failure to make a new high and a move below $700 on the $QQQ would mark the beginning of an (uncertain) Stage 3 Bearish Sideways Trend.
What Happened in June?
June was a roller coaster of uncertainty. Energy prices fluctuated constantly, as did geopolitical tensions. Economic data was mixed at best but generally remained stable. Traders and investors stayed focused on corporate profitability and long-term growth opportunities.
SpaceX went public at $138 per share. The IPO surged to as high as $210 per share but then quickly dropped to the $150s. Any move below $138 could be viewed as a bearish market indication. The failure of the massive IPO to hold its value could drag heavily on the financial markets.
The most notable event was the largest IPO in history—SpaceX ($SPCX). In my professional opinion, what’s interesting is that it is essentially a repackaging of revenue from the company formerly known as Twitter (now X) and Elon Musk’s Starlink, combined with the still-unprofitable launch operations of SpaceX.
In my opinion, the IPO resembles a classic Wall Street financial engineering deal—combining highly profitable businesses with capital-intensive operations into a single public company. Investors will ultimately decide whether the valuation is justified. Keeping a close eye on this recent IPO may provide a good gauge for the future direction of this bull market.
What We’ll Be Watching in July
Here are a few of the key developments we’ll be watching as we move into July:
- The Performance of SpaceX ($SPCX)
As the largest IPO in history, $SPCX has the potential to become a market bellwether — a stock whose performance influences overall market sentiment. All eyes will be on how this IPO trades. One key level to watch is its initial public offering price. If the stock can remain above its IPO price, it could serve as a bullish indicator for the broader market. - Earnings Season Begins Second-quarter earnings reports will begin rolling in during mid-July. Investors will pay close attention to company guidance, particularly from technology, financial, and consumer-focused companies. Strong earnings could extend the current rally, while disappointing results could increase short-term volatility.
- Federal Reserve Policy Interest rates remain one of the biggest factors influencing market direction. While the Federal Reserve continues monitoring inflation closely, investors will be watching every economic report for clues about future monetary policy. Employment data, inflation readings, and consumer spending will remain front and center.
- Artificial Intelligence Investment The AI investment boom continues to be a major driver of market leadership. Large technology companies are investing heavily in infrastructure and innovation, and investors will be looking for signs that these investments will continue translating into revenue and earnings growth.
- July’s Seasonal Strength
Historically, July has been one of the strongest months of the year for U.S. stocks. The S&P 500 and the Dow Jones Industrial Average have both posted positive average returns during July over many decades. While history never guarantees future performance, seasonal trends have generally provided a positive backdrop for investors entering the summer months.
July and Second-Half Market Outlook
We remain cautiously optimistic heading into July… but also believe it’s prudent to take profits when opportunities present themselves.
Bullish Sentiment
The U.S. economy continues to show resilience. Corporate earnings expectations remain healthy, and long-term investment themes such as artificial intelligence continue to support market leadership.
Bearish Indicators
At the same time, elevated valuations, interest-rate uncertainty, and geopolitical developments could lead to periods of heightened volatility. The upcoming midterm elections may also introduce additional political risk.
Considering that the markets have already made a significant move to the upside, they could quickly reverse and enter correction territory. From a technical perspective, however, a market correction would be healthy. A pause could refresh the market’s upward momentum and create a stronger foundation for future gains.
Final Thoughts – Traders and investors need to stay nimble
Investors should consider taking profits when appropriate and reducing overall portfolio risk through diversification. Active traders may benefit from maintaining higher cash positions to capitalize on opportunities created by increased volatility.
From a technical perspective, the market is currently trading in a sideways pattern. Recent rallies have produced relatively shallow new highs, suggesting it is prudent to remain cautious as we enter the second half of the year.
Keep in mind that September and October have historically been among the most challenging months for the stock market, while August is traditionally one of the lowest-volume and most volatile months of the year.
Until next month… trade well!
Written by Michael DiGioia, Director of Education
Mike is available for One-on-One Coaching. Learn More
