“Listen closely to what I say. And if you do this it’ll help you some sunny day” Simple Man Lynyrd Skynyrd

Another uneventful week for global stock markets in terms of headline index movements, as the S&P 500 provided modest gains after a dip the week before. Likewise, with the FTSE100, whose performance this year again reminds us that stock market performance and economic outlooks do not always correlate. It was pointed out that in one weekend paper, to a US investor, the rally in the FTSE 100 this year, combined with the decline in the dollar, would have yielded a return of over 20%. I recall reading that Coutts decided to withdraw its funds from UK equities just over a year ago. When you read headlines like that, you know capitulation of that nature should bring opportunity.

Looking to the week ahead, the release of flash PMI data for the world’s largest developed economies will provide an updated assessment of the economic environment in a month of ongoing heightened uncertainty surrounding US tariff policy. The European Central Bank also meets to set monetary policy, where the market now expects rates to stay on hold. The market will be watching to see if the ECB is open to another cut in September. Other notable US economic reports include new and existing home sales for June, which will provide insight into the state of the housing market. Jobless claims and durable goods orders data will also be released.

We also get a speech on Tuesday from the Fed chair, Mr Powell, who appears under pressure from several fronts, as he defends the committee’s reluctance to ease monetary policy and defy the President. Although it has been notable in the past week, a few committee members seem to be bending towards doing the President’s bidding. We shall see next week, but at present the odds remain on a continuing defiance to bow to the President’s command.

This week, the focus will shift to earnings reports, as numerous global companies are expected to report their earnings. In total, one-fifth of the S&P 500 will report this week. Companies of note include Tesla on Wednesday and Alphabet on Tuesday—the first of the Mag 7. Other notable names we will also hear from are Intel, Verizon Communications, Coca-Cola, General Motors, and HCA Healthcare.

20- and 30-year U.S. Treasury yields rose back over 5% this past week, yet had little impact on U.S. equity markets. Stock markets remain convinced that a US recession will be avoided. Trump cannot afford one; therefore, he will do everything in his power to ensure the US economy continues to grow, which includes exerting pressure on the Fed to cut interest rates. After the strong recovery from the lows of early April, valuations once again look very stretched, but that only matters when it matters.