Markets this week will be filled with exciting new developments, including updates on inflation, rate hike expectations, and consumer health in the economy. Geopolitical developments also took a negative turn at the end of last week, which could spill over to equity markets this week.
1. Ceasefire Issues
Tensions in the Middle East will likely be front and center in the markets this week.
Trump recently announced that the ceasefire deal with Iran was over, although the United States and Iran have continued to maintain a dialogue.1
Oil stocks rallied slightly last week and should be worth keeping an eye on as geopolitical developments continue in the markets this week. Chemical stocks have also benefited from supply-side tensions. Morningstar recently noted that leading chemical stocks rallied by over 20% YTD by the middle of April due to the surge in chemical prices.2
ETFs like the Vanguard Energy Index Fund ETF (VDE) and the Fidelity Select Chemicals Portfolio (FSCHX) could be worth monitoring closely this week.
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2. Upcoming Inflation Data
Investors should also keep an eye on new inflation data, which will be released on Tuesday, July 14. A new Federal Reserve report is calling for 3.7% inflation in June, the highest level experienced since September 2023.3
Inflation has recently peaked at a new high following tensions in the Middle East, and equity investors are cautiously monitoring whether this is a short-term shock or a long-term issue.
While markets appear to have priced in inflation peaking, any ongoing geopolitical tensions and higher inflation readings would reintroduce stronger fears of a future rate hike this year.
3. Fed Reserve and Rate Hikes
The Federal Reserve will present its semiannual monetary report to Congress on Tuesday, July 14, shortly after new CPI data is released.
We are at a potentially crucial turning point in the market, as the Federal Reserve may need to consider rate hikes following its aggressive cuts in 2025.4
The Bank of Japan and the ECB have recently had to hike rates amid inflationary pressures, and the Federal Reserve has been facing increased pressure to follow suit.5
Once new inflation data is released, the Federal Reserve may provide more clarity about its future rate decisions.
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4. Retail Sales Sentiment
There will also be new consumer data released in the markets this week, including June retail sales data on Thursday, July 16, and consumer sentiment data on Friday, July 17. This data will be a strong complement to the newly released CPI data and could impact sentiment for retail and consumer stocks in the markets this week.
Data from previous months was very strong, so any changes in readings in June could impact market sentiment.6
ETFs like the State Street SPDR S&P Retail ETF (XRT) currently trade at a price/earnings discount to the S&P 500 and have had solid performance in the past year.
Themes like retail could have an eventful week following the combination of new inflation and retail sales data released this week.
5. Important Earnings Releases
July will also be a very important month for the market because of new earnings releases in multiple sectors.
One major area of the market to monitor is the financial sector, as leading US banks like Wells Fargo, JPMorgan Chase, and Bank of America will report earnings on Tuesday, July 14.7 The iShares US Financial Services ETF (IYG) has only risen by 1.5% amid broader economic and geopolitical concerns this year.
Other notable earnings releases to monitor in markets this week include Netflix, UnitedHealth Group, and Abbott Laboratories. Investors should also keep a close eye on how tech and healthcare ETFs respond to upcoming earnings updates in the upcoming weeks.
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