Even as trade-worries persist, markets are holding firm. “There may be some threats and saber-rattling, but it’s unlikely to pose a major threat to markets right now,” says Irene Tunkel, chief U.S. equities strategist at BCA Research.

Still, the looming tariff deadline and ongoing negotiations mean investors remain on alert. Julian McManus, portfolio manager at Janus Henderson Investors, explains that the 90-day pause wasn’t meant as a hard cutoff: “It was introduced when markets were faltering, giving policymakers breathing room to negotiate or engineer an off-ramp.”

Investor caution today mirrors the post-March 2020 playbook, when stock allocations rebounded more slowly than major indices, Deutsche Bank strategist Parag Thatte notes. “That lag indicates there’s room for equity exposure to continue rising — and that would be a positive,” he adds.

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What to Watch This Week

• Tariff Negotiations: With the pause deadline approaching, any fresh statements—or conciliatory steps—from administrations or trading partners could sway sentiment. Investors will be scrutinising every headline for hints of escalation or resolution.
• Economic Data Releases: Key U.S. data drops this week—particularly inflation metrics—will offer a window into price dynamics and broader growth trends. These figures could be pivotal in gauging consumer health and shaping expectations around Fed policy.
• Corporate Earnings: Q2 earnings season ramps up. Companies delivering better-than-expected results or upbeat guidance could energise markets. Conversely, cautious tone or margin pressure from corporates might highlight broader economic fragility.
• Federal Reserve Outlook: With fresh data and earnings in play, market participants will be analysing whether recent trends strengthen or weaken the case for rate hikes—or a pivot in central bank strategy.

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Ahead of a Historically Strong Month

July has historically been the S&P 500’s best month—averaging a 2.5% gain over the past 20 years, per Reuters/LSEG data. That historical backdrop offers a tailwind—if this week’s developments inject confidence.

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“We’re at a crucial inflection point,” says Lisa Shalett of Morgan Stanley. “This week institutions must decide: do they trust the rally and adjust allocations accordingly—or step back if fresh risks emerge?”

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In summary: Markets are positioned tentatively but optimistically. The next few days—driven by trade headlines, inflation data, corporate earnings, and Fed commentary—could tip sentiment decisively. Investors are watching closely to see whether clarity, caution, or volatility emerges.

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