Despite the recent consolidation, all major equity indexes appear to have strong technical floors in place. While there is certainly more going on underneath the hood than the typical summer doldrums might suggest, our Technical Dial remains in a Positive position. 

We got our first look at Q2 GDP in July, which, despite a disappointing headline number of +1.5% annualized growth, showed signs of strength with both consumption and private investment advancing at a +3% pace. However, we continue to see signs of stress with lower-income consumers, particularly in the rise of “buy now, pay later” loans, where more than half of users in a recent survey say they wouldn’t be able to make ends meet without them, and nearly a third of users rely on them for basic staples like groceries. For now, we continue to leave our Economic Dial in a Negative position. 

Despite what has been a robust start to Q2 earnings season, investors are becoming more discerning on the quality of earnings within the tech space, with both Meta and Alphabet falling despite a decent print as traders scrutinized their inflated AI-related capital expenditure plans. Combined with pressures from rising bond yields, P/E ratios are likely to be compressed, which leaves our Valuation Dial in a Negative position.