Federal Reserve officials began to enter the pre-meeting silent period this weekend, and the market's expectation that the Fed will start cutting interest rates in September has become mainstream. This week, Biden was surrounded by calls for him to step down, the "Trump deal" heated up, and the epic outage of Microsoft's Windows system on Friday, which intensified risk aversion.

The S&P 500 fell 1.97% this week, the Dow Jones Industrial Average rose 0.72% this week, and the Nasdaq fell 3.65% this week. The S&P 500 and Nasdaq recorded their largest weekly declines since April. The "Trump deal" pushed up U.S. bond yields across the board, with 2-year and 10-year U.S. bond yields rising by about 6 basis points this week. The U.S. dollar index rose 0.26% this week, recording its first weekly gain in three weeks and its best weekly performance since early June.

Gold prices have been falling sharply since hitting a new high, under pressure from the U.S. dollar index and U.S. bond yields. Spot gold fell more than 2% on Friday, breaking through the $2,400 mark. Spot silver fell nearly 3.2% and fell below the $29 mark. U.S. oil fell 2.53% and Brent oil fell 2.82% this week, both falling for two consecutive weeks. The prospect of a ceasefire agreement between Israel and Palestine puts pressure on oil prices.

Given that Biden still claimed on Friday that he "looks forward to returning to the election next week," the tug-of-war over "persuading him to withdraw from the race" will continue. As the three major U.S. stock indexes fall together again, technology giants will intensively disclose their financial reports, which will largely determine the next direction of the U.S. stock market. At the same time, Federal Reserve observers will focus on the U.S. PCE inflation report, while global central bank observers will focus on PMI data from various countries.

The following are the key points that the market will focus on in the new week (all in Beijing time):

Central Bank News: Fed officials enter "quiet period", Bank of Canada is expected to cut interest rates again

Fed:

At 04:05 on Thursday, Federal Reserve Board Governor Bowman and Dallas Fed President Logan gave opening remarks at an event

Federal Reserve officials will enter a quiet period this weekend and are not expected to make comments on monetary policy. The Federal Open Market Committee (FOMC) will hold a rate meeting on July 30-31. A survey of 75 economists conducted by foreign media from July 12 to 17 showed that economists lowered their expectations for US inflation in the first half of 2025 and expected a slight increase in unemployment, factors they expect will prompt the Fed to start cutting interest rates. Economists interviewed believe that the Fed's favorite inflation indicator, the core personal consumption expenditures (PCE) price index excluding food and energy, will reach a year-on-year increase of 2.6% by the end of the year, lower than the 2.7% predicted last month, and the overall PCE price index will be 2.4%, lower than 2.6% last month.

"The Fed is poised to start cutting rates in September, and unless there are adverse inflation readings in July or August, we believe easing is necessary because the labor market is showing signs of easing and lower rates will help avoid broader and deeper cracks in the labor market," said Kathy Bostjancic, chief economist at Nationwide Mutual Insurance Co. "The U.S. economy is outperforming all other G20 countries, and this should continue for years. The U.S. economy's golden age is back," said James Smith, chief economist at EconForecaster LLC.

Other central banks:

At 21:45 on Wednesday, the Bank of Canada will announce its interest rate decision and monetary policy report.

Andrew Kelvin, head of Canadian and global rates strategy at TD Securities, said the Canadian CPI data combined with weak survey data was enough for the Bank of Canada to cut interest rates again next week.

However, UBS believes that the Bank of Canada will remain on hold next week as wage growth has slightly accelerated and inflation data has been mixed. At the same time, UBS emphasized that the signal sent by the Bank of Canada is to gradually reduce policy restrictions. In the review summary of the June rate cut, policymakers did consider delaying the start of the easing cycle to wait for more inflation data. UBS expects the Bank of Canada to cut interest rates in September and December, but this depends on changes in the data.

Important data: Gold net longs jumped to a four-year high, beware of a sharp correction in gold prices!

Tuesday 22:00, US July Richmond Fed Manufacturing Index

Wednesday 15:15-16:00, preliminary July manufacturing PMI data for France/Germany/Eurozone

UK July Manufacturing/Services PMI at 16:30 on Wednesday

At 21:45 on Wednesday, the initial value of the US July S&P Global Manufacturing/Services PMI

At 20:30 on Thursday, the number of initial jobless claims in the United States for the week ending July 20, the initial value of the annualized quarterly rate of real GDP in the second quarter of the United States/the initial value of the quarterly rate of real personal consumption expenditures/the initial value of the annualized quarterly rate of the core PCE price index, and the monthly rate of durable goods orders in June of the United States

At 20:30 on Friday, the annual rate of the US core PCE price index in June, the monthly rate of US personal spending in June, and the monthly rate of the US core PCE price index in June

At 22:00 on Friday, the final value of the University of Michigan Consumer Confidence Index in July and the final value of the expected one-year inflation rate in July

Traders will focus on the Fed's preferred price index, PCE, which is expected to maintain bets on a September rate cut. Hedge funds and other large speculators increased their net long positions in gold to the highest level in more than four years as of July 16, U.S. government weekly data showed on Friday, indicating investors' concerns about the U.S. presidential election and renewed focus on the timing of the Fed's rate cuts.

This week, the market has seen a classic "buy the rumor, sell the fact" situation. On Friday, gold prices fell more than 2% due to profit-taking and a stronger dollar. The sell-off at the end of the week highlights the instability of the current market and the risk of chasing gains. Fxempire analysis said that the short-term outlook for gold has turned to a bearish stance, and technical indicators show that a sharp correction may be imminent. The weekly chart shows a potential bearish closing price reversal top, which could pave the way for a pullback of $200 to $250 from the current price. Several factors contribute to this cautious forecast:

First, the market has probably already priced in the Fed’s September rate cut expectations, and the recent rally in gold has already reflected a 98% probability. Therefore, based on the rate cut expectations alone, there is little room for gold to rise further.

Geopolitical developments could also affect gold's upward momentum. A ceasefire in the Middle East is highly likely, potentially removing key support for gold prices. It is worth noting that gold's current rally began in October 2023, coinciding with the outbreak of the Gaza conflict. A resolution to this situation could prompt a sharp correction in gold.

In addition, the upcoming economic data, especially the PCE report next Friday, could significantly change the market situation. If the PCE data shows that inflation persists, it could cause the market to doubt the possibility of a rate cut in September. This situation could quickly erode gold's recent gains and cause prices to accelerate downward.

Traders should remain vigilant to these potential correction catalysts heading into next week. While gold's long-term appeal as a hedge against uncertainty remains, the short-term outlook suggests caution. Technical signals, fully priced-in rate cuts, potential geopolitical shifts, and upcoming economic data combine to paint a picture of a market prone to a sharp correction in the coming weeks.

important events:

1. Will Biden withdraw from the election?

According to the New York Times, as of Friday afternoon local time, Biden's intention to run for re-election has not changed. Michael Moritz, a major Democratic donor, urged Biden to withdraw from the race. As of Friday afternoon local time (July 19), the number of Democratic congressmen who "called on Biden to withdraw from the campaign" increased to 32.

According to AXIOS, people familiar with the matter revealed that Biden officials told Democratic critics that President Biden is eager to prove them wrong and plans to start campaigning as soon as he recovers from the new crown, and may travel to Georgia and Texas in the next few days.

Gang Hu, managing partner of Winshore Capital Partners, pointed out that if Biden decides to give up his re-election bid and is replaced by Vice President Harris, the "Trump trade" could fall further. State Street believes that if Biden withdraws from the election and traders cut trades related to Trump's victory, the dollar may experience a "short-term negative reaction."

2. Tel Aviv was attacked by a deadly "super-large drone" by the Houthis, and Israel threatened to retaliate

In the early morning of the 19th local time, the Yemeni Houthi armed forces attacked Tel Aviv, Israel, with drones. This was the first attack on Tel Aviv by the Houthi armed forces since the outbreak of a new round of Israeli-Palestinian conflict last year. Later that day, the Houthi armed forces held a large-scale rally in Sanaa, the capital of Yemen under their control, and the Houthi armed forces stated that military operations against Israel were escalating.

After Tel Aviv was attacked by a "super-large drone" of the Houthi armed forces, Israeli officials said that they would discuss "options for an offensive response" in the coming days. Galant announced on the 19th that he would retaliate for the attack on Tel Aviv.

3. Trump will attend the Bitcoin conference

Trump’s appearance at a Bitcoin conference next week will be a key moment for the alternative asset. Bitcoin’s first move above $67,000 in more than a month has renewed speculation that the largest cryptocurrency could soon hit new all-time highs amid optimism that a second Trump presidency would be good for the digital asset.

Stephane Ouellette, CEO of FRNT Financial, said the increased likelihood of Trump becoming president has pushed Bitcoin and other cryptocurrency markets higher. He said that's because, if re-elected, Trump's second administration would create a more favorable regulatory environment for the cryptocurrency industry. "We are on the precipice of another bull cycle, similar to 2021," Ouellette said. Bitcoin reached its all-time high in late 2021.

In the days following the failed assassination attempt on Trump, his odds of becoming president rose to around 63%, according to PredictIt. Around the same time, the price of Bitcoin surged by about 15%. The selection of J.D. Vance as the Republican vice presidential candidate is also a tailwind for cryptocurrencies, according to Ouellette. Vance's ties to Silicon Valley and pro-crypto views will have a favorable impact on policy if the Republican Party takes back the White House from Biden in November, he said.

Company financial reports: Should we panic as U.S. stocks continue to fall?

The next two weeks will not only be a period of intensive release of earnings reports by US stock giants, but will also be a key node in determining the next direction of the market. Among them, next week will see a concentrated release of earnings reports for technology stocks, including Google (GOOGL.O), Tesla (TSLA.O), AT&T (T.N), IBM (IBM.N) and other stocks.

"Next week will be very important for the near-term trajectory of stock earnings, with many of the giant tech companies set to report earnings," said Glen Smith of GDS Wealth Management. "If we see a strong combination of strong tech earnings and softer inflation, this could reverse the market's recent weakness and spark a new leg higher." The "Big Seven" ended the week down 5%. Within the entire tech sector, losses were more pronounced among chipmakers. While forecasts for the "Big Seven" remain strong, their earnings are expected to slow in the second quarter.

George Cipolloni of Penn Mutual Asset Management said some of the recent rotation is due to money flowing out of overconcentrated markets and into out-of-favor, undervalued sectors.

Goldman Sachs strategists said there is a chance that the stock market will suffer a setback this summer. They said a correction in the second half of the year is more likely. Bank of America strategists said investors have flocked to U.S. stocks as they become more confident that the Federal Reserve will cut interest rates in September and that Trump will win the U.S. presidential election.

U.S. stock funds took in about $45 billion in the week ended Wednesday, the fourth-largest inflow ever, Michael Hartnett’s research team wrote in a report, citing EPFR Global data. Small-cap funds took in $9.9 billion, the second-largest inflow ever, and large-cap funds took in $27.4 billion.

Hartnett also said that the stock market is likely to decline after the Fed cuts interest rates, calling it an opportunity to "buy the rumor and sell the fact." However, so-called "smart money" is preparing for a crazy presidential campaign, and these funds want to deploy cash as soon as stock volatility rises and stock prices begin to fluctuate.

Article forwarded from: Jinshi Data