Make-or-break week for stocks: key questions investors are asking

Key points:

• With central banks, earnings, macro data, and geopolitics converging, this week could mark a turning point for global markets.
• Fed signals, July non-farm payrolls (NFP) and PCE inflation data out of the US could reshape the rate cut timeline and revive interest in rate-sensitive assets.
• The August 1 tariff deadline and US-China trade talks are key catalysts for global risk sentiment and sector rotation.
• Big Tech earnings will test whether AI spending is translating into monetization, or risk derailing the Nasdaq-led equity rally.

Macro data and monetary policy

Q: Will the Fed hint a September rate cut?

A: While a July cut is unlikely, the decision is unlikely to be unanimous. A dissent from key members such as Waller or Bowman could shift market expectations toward a September move. That would likely trigger a rally in bonds and rate-sensitive equities, while putting downward pressure on the USD.

Q: How would the markets react if Core PCE surprised to the downside?

A: Core PCE for June, due Thursday, is expected to rise 0.3% MoM (vs. 0.2% MoM in May) and hold steady at 2.7% YoY. However, a softer-than-expected monthly reading (say, 0.2% or below) would reinforce the disinflation narrative and support risk assets. A downside surprise could also push the Fed closer to easing, especially if accompanied by weaker labor market signals.

Q: Will the jobs report on Friday signal cracks in the labor market?

A: The July payrolls report is expected to show job gains of +107K, down from +147K in June. That would bring the data closer to the estimated breakeven pace of around +80K, the level needed to keep the unemployment rate stable. A print below 100K, especially if accompanied by a rise in the unemployment rate to 4.2% (as expected), would suggest momentum is slowing.

Focus will also be on private payrolls, which were soft last month, and average hourly earnings, expected at 3.8% YoY (vs 3.7% prior). Any signs of wage softness could ease inflation fears further. A weak overall report would amplify Fed cut bets, support bonds, and hurt cyclicals and financials, though tech and defensives may hold up better.

Q: What if the Fed stays on hold but July NFP on Friday is weak? Could Trump move towards firing Powell?

A: While there's no immediate risk of Powell being fired, Trump is likely to continue undermining the Fed’s autonomy and credibility through public jabs. His strategy appears aimed at creating a scapegoat if economic conditions weaken closer to the election.

Markets are unlikely to price in direct intervention, but escalating rhetoric could increase policy uncertainty premiums—particularly in rate-sensitive sectors like financials and real estate. The dollar could also face episodic pressure if Fed independence comes under threat, diminishing its appeal as a safe-haven currency in risk-off conditions.

Q: Which sectors benefit if rate cut pricing picks up?

A: Small caps, REITs, dividend payers, and defensives like utilities and staples typically benefit first as lower yields ease financing conditions and boost income appeal. But if growth isn’t a concern—as is the case now—growth stocks like tech can also extend gains, especially as falling real yields support elevated valuations.

Rate cuts could also broaden market participation, bringing relief to underperforming sectors like industrials and financials. In this context, a Fed pivot could set the stage for the next leg higher in U.S. equities, by easing financial conditions without undermining the growth outlook.

Trade & Tariffs

Q: Does the August 1 tariff deadline bring an end to the trade uncertainty?

A: August 1 marks the deadline for reciprocal tariffs under the new baseline trade regime. Countries that haven’t secured trade agreements with the US face tariffs.

For those with agreements in principle, like the EU and Japan, the focus now shifts to how the deals are interpreted and implemented—especially around required investments into the U.S. This round of deals may offer short-term clarity and avoid immediate escalation, but it doesn’t resolve the broader structural imbalances.

With higher baseline tariffs and vague investment commitments, the trade framework remains fragile. Markets could enjoy cyclical relief in the near term, but investors should prepare for ongoing volatility, particularly in sectors tied to global supply chains like autos, semiconductors, and capital goods. Positioning should reflect both the temporary calm and the deeper geopolitical realignment underway.

Q: Will US-China talks avert a new tariff round?

A: The ongoing talks are expected to result in a 90-day extension of the current tariff pause that expires August 12, which would avoid immediate escalation and maintain the fragile status quo. While no grand deal is expected, even a modest agreement would represent progress given how strained relations have been. A truce extension would calm markets and support China tech, semis, and global cyclicals.

A confrontational tone or vague outcomes could reignite fears of renewed tariffs down the line, resulting in a risk-off sentiment.

Q: Is the U.S. exceptionalism trade back?

A: U.S. assets are once again outperforming, underpinned by stronger economic data, AI-driven tech momentum, and fiscal support. Meanwhile, Europe is losing steam – not due to a collapse in fundamentals, but because the focus is shifting from policy promises to actual implementation. European equities rallied strongly earlier this year on hopes of fiscal stimulus, improving manufacturing data, and a synchronized recovery. But with the ECB nearing the end of its rate cut cycle and fiscal delivery falling short, markets are beginning to reassess those optimistic assumptions.

The recent U.S.-EU trade deal, which locks in higher tariffs for the bloc, has further darkened the outlook, especially for export-oriented sectors. Adding to the pressure, the euro’s recent strength has started to weigh on eurozone corporate earnings, as it erodes the foreign-exchange competitiveness of European exporters and reduces the value of overseas revenue. With earnings growth already fragile, this currency effect could become a meaningful drag in the quarters ahead.

In contrast, the U.S. could shift toward pro-growth policies in the second half, including potential tax cuts, deregulation, and a more accommodative Fed. If those materialize alongside strong earnings and resilient data, they could reinforce the narrative of U.S. exceptionalism just as Europe faces a tougher path forward.

Earnings

Q: Can Big Tech justify the scale of AI spending?

A: The focus is shifting from whether AI capex is too high to whether it’s translating into monetization and operational efficiency, and investors are starting to see early signs of both.

Alphabet just raised its full-year capex forecast to $85 billion, citing strong demand for cloud and AI services. Google Cloud is now growing over 30% YoY, and executives noted that AI search results are being monetized at rates similar to traditional search, with AI overviews also driving more traffic. That helped reassure markets that AI spend is beginning to yield returns.

Meta has previously raised capex guidance and shown that AI is improving ad performance and user engagement. Investors will look for more evidence of that in this week’s results, especially given that costs are climbing as Meta builds out a new, dedicated AI team. The company will need to show that rising investment continues to translate into tangible business results to justify its elevated spending trajectory.

Microsoft and Amazon could follow Alphabet’s lead on increasing AI capex now that trade uncertainty is easing, but they will need to back it up with clear monetization pathways—whether through Copilot and enterprise AI tools at Microsoft, or shopping and productivity assistants like Rufus and Q at Amazon.

Apple, meanwhile, may lag on visibility. Analysts don’t expect a major AI update, but any hint that Apple Intelligence-enabled regions are seeing stronger product sales could be seen as a subtle validation of the theme.

Q: What other names could help gauge AI and cloud infrastructure adoption?

A: Outside the big names, investors will be watching:

• Qualcomm (Wed), Lam Research (Wed), KLA (Thu), Tokyo Electron (Thu) for signs of AI chip demand, semiconductor capex, and hyperscaler spending.
• Cloudflare (Thu), MicroStrategy (Thu), Roblox (Thu) for enterprise AI tools, cloud adoption, and platform engagement trends.

Q: Beyond Big Tech, which earnings could offer a read on consumer strength?

A: Several key names this week will offer direct insight into U.S. and global consumer resilience:

• Visa (Tue), Mastercard (Thu), and Booking Holdings (Tue) will shed light on spending trends in travel and services.
• HSBC (Wed), UBS (Wed), and Mastercard (Thu) could also comment on capital flows, lending trends, and regional divergence in economic performance.
• Procter & Gamble (Tue), Mondelez (Tue), and Starbucks (Tue) will give a read on pricing power vs. volume in staples and discretionary categories. Investors will be watching for any signs of consumer trade-down or margin pressure.
• Royal Caribbean (Tue) and UPS (Tue) will offer views into discretionary travel and e-commerce logistics, respectively.

Q: Which industrial or capex-heavy firms could shed light on global demand?

A: Key industrial and logistics names reporting this week include:

• Boeing (Tue), Airbus (Wed), Schneider Electric (Thu), and Trane Technologies (Wed) will help gauge backlogs, capex recovery, and global supply chain normalisation.
• Ford (Wed), BMW (Thu), and Mercedes-Benz (Thu) will be important to assess auto demand, EV rollout challenges, and pricing power.

Q: What if earnings underwhelm in a narrow market?

A: With equity leadership concentrated in a handful of megacap names, the risks are asymmetric. A few big misses—especially from tech giants—could trigger outsized market reactions, spark sector rotation, or even lead to a broader pullback.

In a narrow market, there's little cushion. Disappointment from one or two key players could unwind recent gains quickly, especially if valuations are already stretched and macro tailwinds are fading. Investors will be watching both the results and the guidance closely.

Others

Q: Is the USD bear trend reversing?

A: The medium-term downtrend in the dollar remains intact, anchored by expectations of Fed easing, a narrowing yield advantage, and long-term structural imbalances. However, crowded short positioning, resilient U.S. data, and relative weakness abroad suggest the potential for a short-term reversal.

The recent US-EU trade deal, initially viewed as stabilizing, is now seen as a structural drag for the eurozone, raising tariff burdens and weighing on growth assumptions. With the euro making up nearly 60% of the DXY index, this underperformance is directly lifting the dollar. If U.S. data this week holds firm, and Fed rhetoric remains cautious, the dollar may continue to find support, even as the broader trend remains bearish.

Q: When will gold break out of its range?

A: Gold remains range-bound for now, consolidating between $3,300 and $3,430. The immediate technical hurdle is the 50-day moving average near $3,340. A sustained break above that level would open the path toward retesting $3,400, and a breakout beyond $3,430 could signal a renewed bull leg. On the downside, $3,300 remains key support—marking the lower bound of June’s consolidation zone.

Signs of easing global trade tensions and resilient U.S. economic data have lifted risk appetite and pressured gold, with some safe-haven flows rotating into equities and higher-yielding assets. At the same time, the potential for short-term U.S. dollar strength adds to the headwinds for gold, particularly in the near term.

However, the medium- to long-term backdrop still supports the bull case. A dovish Fed pivot, renewed risks of geopolitical shocks, or a weaker dollar could revive upside momentum. And beneath the surface, structural tailwinds—including persistent fiscal deficits, central bank gold buying, and downward pressure on real yields—continue to provide a solid floor for gold, even as short-term volatility persists.