Some may say the new sales-phenom known as “Christmas in July” has taken on a life of its own in regards for what should or sold not be sold within the sweltering months of the summer. (Christmas sweaters anyone? Bueller?)
Yet, with that said, once we get past the traditional display for fireworks in celebrating July 4th here in the U.S. Everyone assumes that’s it until next year. It’s absolutely a fair assumption. However, this year may be just a bit different than past. Why?
Hint: This July just so happens to be on a collision course with an earnings season that has all the potential for both spectacular blowouts, as well as stupendous flame-outs. All against a backdrop of: Will it rain, pour, or should we all head to the storm cellar as those once luminous clouds of white (aka “Everything is awesome, forever!) suddenly morph into ominous dark shades of grey with lightning flashes and strikes that blind and set trees ablaze?
That’s what happens in nature when really hot air slams into a cold air mass. Nature’s fireworks can make man-made ones look paltry in comparison.
However, when really “hot air” of the type being pushed ad infinitum via the mainstream business/financial media proclaiming the “markets” will rise forever, meet the cold reality of “Will they or won’t they tighten monetary policy?” (i.e., The Fed might make a misstep) Let’s just say the terms “fireworks” and “flame-outs” have potential to catch everyone’s eyes by surprise and give nature a run for its money, let alone wallet.
Today (Tuesday) was the kick-off for reporting earnings, with the big banks leading the charge. The reports were touted as “Blow out!” And yet, their share price fell to close in the red for the day. Is that a harbinger? Personally, I believe, it means nothing in isolation, yet, everything in the aggregate. i.e., the sum total of those reporting in July.
All the tech names such as Apple™, Google™, Microsoft™, Amazon™, Netflix™, Facebook™ and more report later in the month. And while they are reporting, so too, are the reports of what some are calling “red hot inflation worries” that may overtake any credence that the Fed may not need to adjust policy sooner rather, than later.
Combine this with the fact that the stimulus checks are probably long gone (i.e., already spent) possible disruptions via more COVID strains (e.g, Delta, _______(fill in your own here) with potential lock down warnings already circulating (see Australia, U.K., et.al.) eviction moratoriums in the U.S. just about finished, China slowing far faster than anticipated, and you have a real potential for fireworks taking over the “markets” that could give surprise to even the most diehard fan of bright flashes and loud boomers.
Simultaneously, this is also a pivotal point in the year for many other reasons.
We’re now about six months into a new president and administration and, for all intents and purposes, any legislation needing to come forward that requires bi-partisan support to pass – is all but dead-in-the-water till Nov. 2022.
The set up for running in the midterms this 2022 has begun in earnest, and will now all but shut the door for anything to come out of Washington. Basically, if it hasn’t been passed as of now – it ain’t gonna. Period.
Yes, “Executive Action” is always possible, however, every action now will be evaluated through the lens of: “Will it hurt or help in the midterms?” Emphasis on “every.”
Again, look for political gridlock to be in full swing as heels get dug in and every word and action will be subjected to “Elect us or we can’t pass this, that or any other thing!”
This has a direct affect in conjunction on just how “markets” will look to position for the remainder of the year. All eyes will now be fixated on the Fed as it shoots off one trial balloon of babbling nonsense after another regarding inflation, hoping to continually dazzle the crowd with blasts of monetary splendor.
And if those earnings reports have some form of flame-out reaction? “Not to worry!” we’re always reminded for, supposedly, “They got this!”
This July, all I can say is: “They better.” For, if not?
“Going out with a bang!” may not be as whimsical a thought as the reality it may portend.
As always, we shall see.
© 2021 Mark St.Cyr