This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
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The chart of the day
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What we're watching
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What we're reading
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Economic data releases and earnings
Seven months into the year, and halfway through second quarter earnings reporting season, equity investors seem to be feeling pretty good.
The S&P 500 has climbed for five straight months. It’s up 19% this year. Since JPMorgan kicked off earnings season, the index has risen about 1.5%, which isn’t fantastic but is still a gain.
In short, as we closed out July, were the bears giving up?
One of the most prominent bears has — sort of. Morgan Stanley’s Mike Wilson last week conceded “we were wrong” in a note to investors. But he kept his year-end S&P 500 target unchanged at 3,900.
Bullish investor sentiment, as measured by the American Association of Individual Investors, is near its highest level since summer 2021.
Some of the best performers in July — Zions Bancorp, KeyCorp, Comerica — show investor relief after their earnings, seen as confirmation that the banking system indeed did not suffer severe damage as a result of the bank collapses in the spring.
A stroll through the Yahoo Finance trending tickers page is a walk through a veritable meme garden — Carvana growing here, Tilray blossoming there. While it may no longer reflect just retail trader enthusiasm but also institutional interest, it’s nonetheless another sign of risk engagement.
The question is what could be the herbicide for these hardy weeds? The Fed is always a prime contender, but investors seem at least momentarily convinced of a soft landing. Earnings thus far have fallen 7.3%, about in line with estimates, and again, without killing the broader rally.
Economists have made much of both the wind-down in excess savings and the resumption of student loan payments, which could both hit this fall. Those events could, in theory, hurt not just consumer spending but equity inflows as well.
But first, a test of the calendar variety: August has been the toughest month for stocks since 1986.
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