To The Moon

• S&P 500 and Nasdaq 100 returned 0.89% and -0.29%, respectively, last week.

• Major market movers include Microsoft (-3%), Meta (-7.6%), Amazon (-2.76%), Alphabet (-2.9%), Netflix (-6.23%), Nvidia (+2.71%), Apple (+1.86%), Eli Lilly (+3.7%), and Home Depot (+7.53%).

• The main reason the S&P 500 still returned positively last week, despite major tech stocks suffering a sell-off, is due to broadening market breadth. 426 out of 505 stocks in the S&P 500 index returned positively last week.

Important Events This Week:

15-18 Jul: Trump will speak at the Republican convention.

Monday: Powell speaks, Goldman Sachs earnings.

Tuesday: Retail Sales, earnings results of Bank of America and UnitedHealth.

Wednesday: ASML’s earnings.

Thursday: Unemployment Claims, earnings results of TSMC and Netflix.

I remain optimistic about the US equity market this week due to:

1) Investors may snap up some Trump trades:

• Trump's chance of winning the US presidential election has increased to 67% following the failed assassination attempt, according to the US betting site PredictIT.

• If Trump is elected, he may renew his 2017 tax cuts, which expire at the end of 2025, and this will be constructive for the stock market.

• Investors may start to position for a Republican sweep.

Source: Bloomberg

2) Broadening Market Breadth:

• The weaker-than-expected job market is raising hopes for a rate cut.

• Traders now see an 88% chance of a rate cut in September, and another two rate cuts in November and December, according to CME FedWatch. Investors are rotating to some rate cut beneficiaries as they have lagged this year.

• The iShares Russell 2000 ETF ( $iShares Russell 2000 ETF(IWM)$ ) rose 7.25% last week on rate cut hopes.

3) Wall Street has revised up their earnings estimates:

• Analysts have broadly upgraded companies' earnings estimates going into the earnings reporting season. Earnings surprises this week may prompt analysts to further upgrade their estimates.

• This week, companies representing 10% of the total market cap of the S&P 500 index will release their earnings.

• ASML and TSMC will report earnings this Thursday and Friday, providing some clues on how AI-related companies' earnings will perform in Q2 2024.

Source: Bloomberg

Source: UBS

In conclusion, S&P 500 $SPDR S&P 500 ETF Trust(SPY)$ $Vanguard S&P 500 ETF(VOO)$ $iShares Core S&P 500 ETF(IVV)$ is likely to continue its uptrend momentum. However, S&P 500 may face a correction on the FOMC first rate cut on 18 Sept as market participants may have frontloaded much of the AI and earnings optimism.