After a blazing start to the year, Wall Street is now reaching the altitude where the climb gets harder. Earnings are still growing, but the breakneck pace is easing. The S&P 500 surged 13.6% in Q1 and 10.3% in Q2, but Q3 and Q4 are projected to cool to 7.6% and 7.0%. Still solid, but far from the double-digit gains that make rallies effortless.
A notable twist this quarter: in July, analysts slightly raised Q3 forecasts, a rare move since Q2 2024. Energy and Tech drove the optimism, while health care lagged. With valuations at 22x forward earnings, there’s little room for error. Higher tariffs or weaker demand could quickly reverse sentiment.
The Fed’s role is becoming more prominent. July’s jobs report disappointed, showing only 73,000 jobs added versus 110,000 expected, alongside a downward revision of 258,000 from prior months. Wage growth is slowing, temporary hiring is waning, and the labor market is loosening faster than expected.
Markets are now pricing a 90–95% chance of a September rate cut and approximately 62 bps of easing by year-end, indicating two or three cuts, potentially bringing rates near 4% by early 2026. While an easier policy appeals to investors, it’s being driven by growth concerns rather than a clean inflation victory.
Trade tensions are back in focus. On August 12, the pause on U.S.–China tariffs is set to expire, potentially restoring tariffs of around 80% on many goods. President Trump has already doubled tariffs on Indian imports to 50% and may impose targeted duties on Canadian and Mexican products. Tech, autos, and industrials could be most affected.
In the semiconductor space, Trump has threatened 100% tariffs unless U.S. chip production scales up. This has triggered massive investment commitments from Apple, TSMC, Nvidia, GlobalFoundries, and Texas Instruments, collectively worth hundreds of billions. It’s a long-term security move, but in the short term, it could pressure margins and cash flow.
War Talks in Focus
Geopolitics may shift markets in either direction. Trump is pushing for a resolution to the Russia–Ukraine conflict, with signals from Moscow hinting at possible talks. In the Middle East, calls from key Arab states and the EU for Hamas to cede control in Gaza could mark a turning point. Any breakthrough might ease oil prices, reduce inflation, and benefit sectors such as airlines, transportation, and consumer discretionary.
Meanwhile, the Fed’s balance sheet has dropped from $9 trillion to $6.7 trillion, with quantitative tightening likely ending around $6.2 trillion in early 2026. Liquidity will remain tight until then, and QE is unlikely unless a deep recession emerges. The months ahead will require balancing the upside from rate cuts or peace deals against the downside from slower earnings, trade shocks, and a weaker job market.
Price Movements of the Week
Currency and commodity markets are setting up for action as several pairs and assets reach key technical levels.
USD Index: Consolidating; watch 98.50 for resistance and 97.40 as the next downside target.
EURUSD: Buyers may appear at 1.1580 or 1.1545, with 1.1750 as the next upside level.
GBPUSD: Support at 1.3355 and 1.3300; resistance at 1.3560.
USDJPY: Reversal signs possible at 148.75 or 149.30.
USDCHF: Sellers could emerge at 0.8117 or 0.8150.
AUDUSD: Nearing 0.6570 resistance;
NZDUSD: Testing 0.6015;
USDCAD: Potential support at 1.3675.
USOil: Under pressure at $63.35; a break lower could target $61.15.
Gold: Rallying toward $3,430, a potential profit-taking zone.
S&P 500: Erasing last week’s bearish tone, aiming for $6,630.
Bitcoin: Breaking above resistance, eyeing $121,400.
Natural Gas: Holding $2.90 could spark a rebound; otherwise, $2.55 is the next support.
Market reactions at these levels will be key. Sharp rejections may trigger reversals, while decisive breaks on strong volume could extend trends. Given ongoing macro risks, traders should pair technical analysis with the bigger economic picture.
Key Events This Week
Tuesday, 12 Aug: Australia’s cash rate decision (expected cut from 3.85% to 3.60%), U.S. CPI at 2.8% y/y (up from 2.7%).
Thursday, 14 Aug: UK GDP at 0.2% (vs. -0.1%), U.S. PPI at 0.2% (after -0.5%).
Friday, 15 Aug: U.S. retail sales at 0.5% (vs. 0.6%), consumer sentiment at 62.2 (vs. 61.7).
Looking Ahead: Watch Canada’s CPI (19 Aug), New Zealand’s OCR decision (20 Aug), and the Jackson Hole Symposium (22 Aug) for fresh central bank signals.
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