July 27, 2025
Weekly Market Outlook
By Geoff Bysshe
This week will offer investors an abundant buffet of corporate earnings and economic data that could embolden the bulls or give enthusiastic investors indigestion.
This week will be the busiest week of the second-quarter corporate earnings season, with 151 companies in the S&P 500 reporting. It will include 4 of the most influential companies. On Wednesday, META and MSFT report. Then Thursday AMZN and AAPL report.
According to Factset, more than 82% of the 169 S&P 500 companies have reported beating Wall Street’s expectations.
However, in a lot of cases, estimates were lowered coming into the quarter, and the rate of earnings growth overall is slowing as shown by the chart below (see red arrow).
Additionally, there’s an ominous resemblance to Q1 2022 labeled with the red “?”, which we’ll cover later.
This sets up an environment in which companies that don’t exceed expectations can be met with more selling than celebration by investors. Last week, Google had a solid “better than expected” report that led to an enthusiastic opening gap higher, but it was followed by selling all day, resulting in only a modest gain.
Additionally, disappointments will likely become disasters for the stock price, i.e., TSLA.
Watch market reactions carefully.
While earnings should be the driver of the market for the coming weeks and months, it’s likely that the FOMC meeting with a press conference will get all the attention on Wednesday, but as we’ll discuss, history has told us what will likely happen here.
Finally, there won’t be any rest until after Friday’s big monthly employment report!
Considering that all of the above are influenced by the volatile changes and expectations related to tariffs and deportations, investors will have a lot to consider this week.
Let’s simplify and prioritize the relevant news to distill the market’s message from all the media’s noise.
As much as I try not to let the dollar’s trend become a dominant topic, in a week with internationally influenced earnings, a Fed meeting, and inflation data, it can’t be ignored.
A weaker dollar, in theory, is good for U.S. manufacturers and exporters. It makes American goods cheaper abroad and, importantly for investors, boosts the value of overseas earnings when translated back into dollars. With roughly 30% of S&P 500 revenue coming from foreign sources, a weaker dollar has the potential to help topline growth.
This has been demonstrated by Pepsi, Coke, and Netflix, all mentioning the weaker dollar as a positive factor in their earnings reports.
But that tailwind carries a dangerous headwind: inflation. According to economist Torsten Slok, the dollar’s 10% depreciation this year could lift inflation by nearly 0.5% over the next nine months. That would push already stubborn inflation further away from the Fed’s 2% target.
In macroeconomics, there are no free lunches. Gains in export competitiveness may be offset by price pressures on imported goods, eroding corporate margins or triggering more aggressive Fed responses.
While some corners of the market argue inflation is cooling, others point to a resurgence, particularly in goods. Categories such as footwear, apparel, and tools—which are heavily import-dependent—are seeing rising costs. Yet, many companies have yet to pass those increases onto consumers. That’s good for the consumer, but bad for corporate margins.
Retailers, in particular, are caught in the quandary. If they hold prices steady, margins shrink. If they raise prices, they risk reduced sales. Either way, earnings are at risk.
Walmart’s earnings call last quarter made it clear: price hikes are coming.
Chair Powell has repeatedly stated that the Fed expects some rise in inflation from tariffs.
Meanwhile, the broader inflation picture is complicated by a “horse race” dynamic—goods prices rising, services prices cooling, and the impact of tariffs lagging and unclear.
Any or all of these factors can have significant changes, yet the headline inflation number and trend may not change or become easier to predict.
This week’s PCE data will arrive on Thursday, after the FOMC meeting so the media is likely to talk about it, but it would have to be an extraordinary surprise to have a lasting impact.
Earnings will be the driver.
Despite the macro bearishness, corporate earnings have been resilient—so far.
There is one (or more) ominous pattern in the chart above. The “?” label at Q1 2022 notes that earnings beat estimates handily, yet at that time, stocks were falling from their 2021 bull market peak rapidly.
In 2022, markets turned lower on fears of rising rates and lower earnings. While earnings were positive in the second quarter and the market exceeded them, both earnings and estimates were in a sequential quarterly decline. The market correctly anticipated further declines in earnings and estimates.
Now look at our current sequential quarterly trend. Top?
There are reasons for this time to be different, but that doesn’t mean the risks of following the example set in 2022 are not still there.
One of the “canaries in the coal mine” with respect to this risk is margins. Are companies absorbing inflation through margins? Are they passing it to consumers through price increases? Are revenues holding up despite macro stressors like tariffs and slowing job growth?
These questions are critical because we are clearly entering an environment where investors fear margin pressure from tariffs and a weakening labor market.
Investors are still focused on when the Fed will cut rates, even though we’ve spent the whole year pushing the “next date” back.
Chair Powell has been very clear about the Fed’s “wait-and-see” mode, looking for clearer signs of economic deterioration before cutting, balanced against a desire not to cut without more data about the inflationary potential of the tariff policies.
This week the market’s reaction to the Fed, if there is any “Fed reaction” at all, will likely be based on Powell’s commentary on the economy. In fact, it may be best to use the commentary to see if it lends any insight into what all the other factors discussed here will lead to, rather than expect insight into when the next cut will be.
More importantly, the market is most likely fine with no rate change and no new clarity on when the next cut will be. The market’s suspended disbelief that we won’t get a rate cut ‘soon’ has worked for the bulls all year. Why expect it to stop working now?
This week’s jobs report will likely be interesting, but not decisive.
Last month’s data was skewed by a jump in public sector hiring, especially in education. But under the surface, private sector job growth has been slowing. The consensus forecast for this Friday’s report is around 100,000 new jobs.
Economist Torsten Slok offers this perspective…
At first glance, that may seem weak. But context matters. Thanks to changing immigration policy, particularly deportation efforts estimated to reduce the labor force by nearly one million annually, the so-called “break-even” number for job growth is now lower—around 70,000. If labor supply is shrinking, even modest job creation can keep the unemployment rate steady.
However, there’s a catch. If job growth remains positive simply because the labor pool is shrinking, it’s not necessarily a sign of strength. It could signal fragility in both the economy and consumer demand.
This is just one of several factors that is make this “hard data” less solid, especially if a primary driver of the conclusion is a policy that is being aggressively contested in the courts.
The elephant in the room remains tariffs.
They encapsulate everything Wall Street hates - lack of recent experience to model an outcome, volatile, opaque, inconsistent, LAGGING, outcomes that change with economic conditions and the whims of foreign leaders, and more.
For example, the chart below shows just a few of the factors listed - the volatility of the announced rate, the dramatic difference in the effective vs. announced rate, and the lag of the effective rate.
In short, the real and measurable impact of tariffs is going to lag and be difficult to agree on among investors, economists, the Fed, and the administration.
That said, they’re believed to be contributing roughly $400 billion annually to government coffers—but at whose expense?
Either consumers pay more, companies eat the cost, or earnings take a hit. So far, companies have absorbed much of the pressure, but that can’t last forever.
Retailers, import-heavy sectors, and multinationals are all exposed. As more companies report earnings this week, investors will be scrutinizing not just sales and profits, but commentary on pricing power, cost pressures, and future margin expectations.
The uncomfortable truth is that the tariff burden may be hiding in plain sight—camouflaged in stable prices and decent earnings, but eroding profitability beneath the surface.
Again, this earnings season could reveal how much longer companies can or are willing to hide or carry that load.
With inflation potentially rebounding, the Fed on pause, earnings under pressure, and the labor market subtly deteriorating, the backdrop suggests slower growth ahead. The key for investors is how these interrelated concerns manifest in the data this week.
A few possibilities:
Since the market has demonstrated complacency with its suspended disbelief that we won’t get a rate cut ‘soon’, the bulls should hope for stronger than expected earnings.
Markets are priced for a goldilocks outcome—stable earnings, tame inflation, resilient jobs, and a Fed ready to ease. But with each piece of the puzzle connected to another, its a delicate balancing act.
This week will offer a feast of earnings, but there will be no free lunch.
Let’s be tactical so we are the ones not paying the bill.
 |
 Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts.
The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The video analysis dives deeper. |
Summary: Markets pushed to new all-time highs in the S&P and Nasdaq with strong breadth across sectors, supportive volume, and continued leadership from growth stocks, while global equities and crypto also showed strength—highlighting a broadly risk-on environment. However, mixed short-term internals like the McClellan Oscillator and Advance-Decline line, along with neutral signals in new highs and small caps, suggest some caution beneath the surface and we would like to see it hold the trendlines from the April-June lows to keep the market uptrend intact.
Risk On
Neutral
Every week you'll gain actionable insight with:
