Good Morning Investors,
The S&P 500 closed Monday at another record high, its sixth consecutive all-time close, though the 0.02% gain barely registered despite the weekend's EU trade breakthrough. This muted response reveals a market focused on the week ahead rather than celebrating yesterday's headlines. With over 150 S&P 500 companies reporting, the Fed meeting concluding Wednesday, and crucial labor data throughout the week, investors are positioning for what could be Wall Street's most consequential week of the summer.
The measured response to trade progress signals maturity. Markets are no longer celebrating every tariff reduction but rather systematically removing tail risks. Monday's action suggests investors understand that real catalysts lie in earnings execution and Fed guidance, not political theater. As we enter the busiest earnings week of 2025, the focus has shifted from macro uncertainty to fundamental performance.
Opening Bell
Stock futures opened modestly higher Tuesday morning, with S&P 500 ($SPY ( ▲ 1.54% )) futures gaining 0.28%, Nasdaq 100 ($QQQ ( ▲ 1.54% )) futures up 0.45%, and Dow futures ($DIA ( ▲ 1.94% )) adding 40 points (0.1%). The measured gains reflect markets digesting Monday's record closes while positioning for a week packed with corporate results and policy decisions.
The tepid response to the EU trade deal underscores how effectively markets have adapted to Trump's negotiating framework. Each successive agreement, Japan, Indonesia, and now Europe, has converted uncertainty into manageable outcomes. The baseline 15-20% tariff rate announced Monday provides clarity that markets can price, removing the paralysis that comes from unknown unknowns.
Market Framework: Baseline Tariffs Set the New Normal
President Trump's Monday announcement that countries without deals will face 15-20% baseline tariffs provides the framework markets needed. While higher than the originally proposed 10% universal tariff, this range creates predictable parameters for business planning and market valuation models.
The EU deal at 15% tariffs, including $750 billion in U.S. energy purchases and $600 billion in additional investments, establishes the negotiating template. This isn't capitulation, it's systematized trade policy that businesses can model and adapt to. The key insight is that Trump's approach, while aggressive, produces workable outcomes rather than economic warfare.
With Friday's deadline approaching, attention turns to China. The Stockholm talks represent the highest stakes negotiation, with potential for another 90-day pause that would extend the current framework. Any progress here would remove the final major uncertainty heading into August, potentially unlocking another leg of the rally.
Corporate Framework: Earnings Season Reaches Peak Intensity
This week delivers the busiest earnings calendar of 2025, with heavyweights Meta ($META ( ▲ 2.12% )) and Microsoft ($MSFT ( ▲ 0.59% )) reporting Wednesday, followed by Amazon ($AMZN ( ▲ 3.1% )) and Apple ($AAPL ( ▲ 1.27% )) Thursday. The stakes are unprecedented, these four companies alone represent over $12 trillion in market capitalization and will largely determine whether the Magnificent 7's AI spending thesis holds.
Early results continue supporting our infrastructure investment theme. Of the 170 S&P 500 companies that have reported, 83% have beaten expectations, well above the historical 73% average. More importantly, companies investing aggressively in AI capabilities are being rewarded while those playing defensively face punishment.
The labor market data throughout the week provides crucial context. Tuesday's JOLTS report, Wednesday's ADP private payrolls, and Friday's non-farm payrolls will determine whether the economy can support continued AI Capex without triggering recession fears. The market needs Goldilocks conditions, growth strong enough to justify spending but not so strong as to reignite inflation concerns.
Tuesday's reporting calendar includes several bellwethers: Boeing faces scrutiny over production issues, UPS provides logistics visibility amid tariff uncertainty, and UnitedHealth offers healthcare cost inflation insights. Each offers unique perspectives on how businesses are navigating the current environment.
Economic Framework: Fed Decision Anchors the Week
Wednesday's Fed meeting occurs at a critical inflection point. While markets price 97% odds of unchanged rates, the forward guidance will matter more than the decision itself. Chair Powell faces pressure to provide September clarity, especially with core PCE effectively at target when adjusted for housing distortions.
The economic data calendar supports a dovish tilt. Tuesday's JOLTS report is expected to show continued labor market normalization, while Wednesday's Q2 GDP estimate (2.3% expected) should confirm solid but not overheating growth. The key insight is that with tariffs now providing a modest inflationary tailwind, the Fed has room to ease if employment softens.
Friday's jobs report represents the week's crescendo. Expectations of 100,000 jobs added and unemployment rising to 4.2% would signal continued normalization without triggering recession fears. This backdrop supports our view that September cuts remain on the table, particularly if inflation continues moderating.
Strategic Outlook: Sentiment Indicators Support Higher Prices
Goldman Sachs' equity sentiment indicator reading of neutral (0) provides important context for the current rally. This metric tracks actual positioning across hedge funds, mutual funds, and retail investors, not survey-based vibes. A neutral reading suggests significant room for sentiment improvement as earnings and Fed policy provide catalysts.
Oppenheimer's John Stoltzfus raising his year-end S&P 500 target to 7,100 from 5,950 exemplifies the strategic recalibration occurring across Wall Street. The 11% upside from current levels reflects reduced uncertainty and improved earnings visibility. My personal target of 6,500 for 2025 remains intact, with 7,000 still achievable by mid-2026.
The technical picture supports continued strength. Six consecutive record closes represent healthy price discovery rather than speculative excess. Importantly, each new high has come on measured volume and modest percentage gains, suggesting institutional accumulation rather than retail euphoria.
Valuation concerns remain overblown relative to growth prospects. The market's willingness to reward long-term AI positioning over short-term earnings optimization represents a fundamental shift in investor priorities. Companies demonstrating commitment to technological transformation continue outperforming those focused on financial engineering.
Key Earnings This Week
Tuesday brings Boeing, UPS, UnitedHealth, P&G, Spotify, and Visa. Wednesday features Meta and Microsoft. Thursday delivers Amazon and Apple. Focus on AI spending commentary, forward guidance, and management confidence levels.
Final Thought
The muted response to Monday's trade progress signals market maturity. Investors are no longer celebrating every headline but rather methodically removing uncertainties while focusing on fundamental drivers. This week's earnings deluge and Fed meeting will determine whether July's momentum can extend through year-end.
The Goldman sentiment reading of neutral provides crucial context, positioning remains conservative despite the rally, suggesting room for continued upside as results validate the AI investment thesis. With 83% of companies beating estimates and baseline tariff rates now established, the path forward appears increasingly clear.
I maintain my constructive outlook and expect this week's catalysts to provide the next leg higher. The combination of strong earnings, dovish Fed positioning, and reduced trade uncertainty creates a compelling setup for continued strength.
Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.