Investors are entering the first week of August with markets world-wide shifting back into a risk-on investment mode. Risk-on environments come into fruition during times of growing corporate earnings, an optimistic economic outlook and changes to central bank policies.
With this sudden change in investment activity due to global economic issues, I analyzed my charts and put together my stock market predictions for this week.
And while some investors may want to put their money into riskier assets in a risk-on environment, there are some key stocks to avoid at all cost.
The Chinese government — which I have covered extensively— looks to be slowing its roll with cracking down on big tech companies, and is trying to open dialogue with the U.S and the Securities and Exchange Commission (SEC).
Last week, the SEC took some restrictive measures against Chinese companies listing in the U.S. stock market. It has stopped processing registrations for Chinese initial public offerings (IPO) — and other security sales — in the United States until it gets clarity in what the Chinese government has in store for its technology companies.
But don’t let this change of heart fool you, this is nothing but a calculated move on the Chinese government’s part. I view this as an ebb and flow of the dance of political power, not a policy shift.
I also expect the bearish sentiment toward China stocks will remain throughout the month of August. However, this is only one of our stock market predictions for this week.
Stock Market Predictions This Week: China, the $1T Deal, Earnings and More!
Futures in the U.S. bid up Sunday night immediately after news hit that an infrastructure spending deal would get wrapped up in congress this week.
The $1 trillion infrastructure package proposes to rebuild U.S. roads, bridges, transit, broadband and more.
One key stock to watch during this is Nucor Corp. (NYSE: NUE), which is a North Carolina based steel company. Steel is one of the key elements of most infrastructure plans today, so I’m curious to see price action of this stock on any announcement.
In fact, the stock is already up 89% this year. If NUE can’t take out the year high of $110.96 on a deal, then when will it?
However, if this ends up being the case, then I’d lean short on the stock — it’s a classic “sell the news” set up .
And speaking of selling stocks, I’m doubly curious on how the market will react to earnings reports from Alibaba Group Holding Ltd ADR (NYSE: BABA), BP plc (NYSE: BP), Toyota Motor Corp. (NYSE: TM), Uber Technologies Inc. (NYSE: UBER) and Moderna Inc. (Nasdaq: MRNA).
I’m particularly interested in BABA — it’s down 16% this year. It’ll be fascinating to see if the restrictive, punitive measures taken by the Communist Party of China (CCP) had any material impact on earnings.
On the opposite end of the 2021 stock performance is MRNA — which is up about 210% this year! The company is, of course, crushing it with vaccine and booster shots, but I’m wondering how explosive price action will be from the stock after Thursday’s report.
We also can’t forget about this major market mover this week: Friday’s job reports.
This has become a key data point of the Federal Reserve for determining full employment — with “inflation be damned” becoming the Fed’s mantra of 2021. A white-hot labor market would see risk-off in stocks and a rate rise in the bond market.
The jobs number will set the tone for the first half of August, so watch for it closely on Friday! Also, do you remember the last time we expected 1 million jobs and got only 850,000 instead?
The chance of big surprises on this number is super high, as economists are dealing with unprecedented times — and failing miserably in their estimates.
Remember, guys, big surprises equal big market moves.
Be sure to share your thoughts about my stock market predictions for this week in the comments section below.
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