With a resolution between the United States and Iran in sight, Wall Street’s outlook at the midpoint of this year is rosier than could have been expected at almost any point in the past six months. This week, JPMorgan raised its 2026 S&P 500 index target from 7,200 to 7,800, suggesting it could rise another 5% from current levels thanks to a “blue sky” scenario. Some investors are increasingly optimistic about the market’s outlook. For example, Thursday’s PCE report showed inflation at its highest level in nearly three years, but also confirmed that consumer spending remains strong, suggesting the U.S. economy will be able to absorb the temporary spike in energy prices that many are expecting. “I think it’s very likely that stocks will continue to rise significantly from here until the end of the year,” said David Miller, investment director at Catalyst Funds. That doesn’t mean investors expect stock prices to rise in a straight line. Volumes are expected to be lower over the coming week with a holiday-shortened week leading up to the Fourth of July weekend, which celebrates the United States’ 250th anniversary, which could lead to more market volatility. At the same time, volatility can increase as managers rebalance their portfolios towards the end of the month or quarter. This week’s .SPX 5D Mountain S&P500 Seasonal patterns beyond the weekend are also mixed. July is the best month of the third quarter for the Dow and S&P 500, but it also marks the start of the worst four months for the Nasdaq, which averages a 0.8% decline in the same month during the midterm election period, according to the Stock Traders Almanac. Bank of America technical strategist Paul Sciana also warned clients this week that the risk of a correction was rising and urged investors to take some protection heading into the third quarter. Investors will take stock of where they stand and may cap some of the gains in the biggest winners heading into the second half of the year, but there will certainly be some volatility surrounding the midterm elections, during which many are hoping the bull market will extend beyond tech. Some companies are looking to reduce their exposure to hyperscalers until they are more confident that they can continue the impressive revenue growth they have achieved so far this year. The software companies most vulnerable to AI disruption are becoming the clear winners. Semiconductors, or memory, remain the biggest beneficiary of AI trading, but here too many investors are concerned that semiconductors have risen too quickly in recent weeks and are now waiting for a better position for entry. “If I were an investor looking to put my next little bit of money into stocks, I would just say, ‘Be patient,'” said Darrell Cron, chief investment officer of Wealth and Investment Management, a division of Wells Fargo. “We think there may be some volatile buying opportunities over the summer.” Cronk said he prefers U.S. stocks over international stocks, large-cap and mid-cap stocks over small-cap stocks, and thinks the best value may be in financials and industrials. He said small-cap stocks, which have been trending lower recently, are one area to avoid, especially with the reconstitution of the Russell 2000 index taking place on Friday. Investors are also keeping an eye on next week’s jobs report, but expect it may have little impact on the stock market, which is increasingly concerned about inflation, barring a big surprise. The federal funds futures market is now pricing in a rate hike as early as September, after Federal Reserve Chairman Kevin Warsh signaled at the last FOMC meeting that he would be more focused on the inflation that investors were expecting. Encouraging signs that inflation is declining could ease these concerns. Inflation concerns are also reflected in the bond market, with the yield spread between two-year and 10-year Treasuries narrowing further this week. Investors will be watching to see if this trend continues, as an inversion could heighten fears of a recession. A stronger dollar, lower oil prices and weaker commodity prices could also reposition investors’ portfolios heading into the second half of the year. But for now, investors appear to be breathing a collective sigh of relief after hustling through an unsettling first half that included major geopolitical conflicts and tremors over the possibility of AI disruption. Earnings remain strong, as do consumers, and traders have not stopped buying on the bullshit. Week Ahead Calendar All Time (ET). Tuesday, June 30th 9am FHFA Home Price Index (April) 9:45am Chicago PMI (June) 10am Consumer Confidence Index (June) 10am JOLTS Jobs (May) Revenue: Nike, Constellation Brands Wednesday, July 1st 8:15am ADP Employment Survey (June) 9:45am S&P Global PMI Manufacturing Final Index (June) 10 a.m. Construction Expenditures (May) 10 a.m. ISM Manufacturing (June) Earnings: General Mills Thursday, July 2nd 8:30 a.m. Preliminary Hourly Wages (June) 8:30 a.m. Preliminary Average Weekly Hours (June) 8:30 a.m. First Billings (June 27) 8:30 a.m. Manufacturing payroll (June) 8:30 a.m. Non-farm payrolls (June) 8:30 a.m. Private non-farm payrolls (June) 8:30 a.m. Unemployment rate (June) 10 a.m. Last durable goods orders (May) 10 a.m. Factory orders (May) Friday, July 3 The New York Stock Exchange was closed for Independence Day.
