JPMorgan: Three key factors could end the summer rally in the US stock market

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Golden Finance reports that on July 10, Andrew Sheats, Head of Global Fixed Income Research at Morgan Stanley, said the firm is closely monitoring three major obstacles that could cause the stock market to stumble in summer; historically, summer is usually the strongest season for stock market performance. The first major risk is the Iran conflict flaring up again. The U.S. Strategic Petroleum Reserve has fallen to the lowest level in history; if the conflict escalates again, this could weaken its ability to respond to shocks. The second major risk is the Federal Reserve raising rates. The expectation is that the Fed will keep interest rates unchanged through the end of the year, which is one of the key pillars supporting the current bull market in stocks. The risk is that this assumption could be wrong, and that such an error could become apparent quickly. Of course, there is a view that if the Fed is concerned about inflation, it should not delay action. The third is a weakening outlook for AI capital expenditures. The Q2 earnings reports may show a more cautious approach to spending, perhaps because the share prices of some companies that have made large investments in AI have recently performed poorly. Given that current growth and earnings prospects are highly tied to AI, and that investors have increased favor for AI concept stocks, this situation will bring risks.
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