3 Reasons This Stock Market Surge Is About to Make Its Final Gasp

1. Stock Market-Boosting Stimulus Will Start To Fade
   The U.S. consumer has been the epicenter of pandemic stimulus payments. The American economy is heavily dependent on consumer spending, so lawmakers are focused on keeping consumers strong.

The belief that U.S. consumers will return to spending as they did in February is a huge part of why the stock market has been able to rally.

Next month, we’ll find out if that’s true.

Much of the government’s support will start to evaporate in July, and markets will get their first look at the true health of U.S. consumers.

The government’s additional $600 per-week unemployment benefits run out at the end of July. Barring an extension, this will leave a great many people struggling with a ~$2,400 gap in their monthly income.

2. Earnings Season Isn’t Going To Impress
   Perhaps the greatest risk to the U.S. stock market is earnings season.

In July, companies will start to report their second-quarter results, and investors will get their first glimpse at how they’re planning to deal with the pandemic fallout.

The S&P 500 is already at its most expensive level relative to future earnings in nearly two decades.

Earnings season will either confirm that 2021 is going to be the bumper year investors have priced in, or it will force them to face the harsh reality that the pandemic won’t be so easy to brush off.

3. Election Season Is Looking Worse And Worse For Wall Street

Investors haven’t paid too much attention to the trajectory of the November elections, but next month, they’re likely to start paying attention.

While everyone knows Joe Biden is the Democrats’ candidate, July’s Democratic National Convention will make it official. It will likely be the start of more aggressive campaigning, and the election will dominate the headlines as public interest in virus coverage continues to wane.

That could be bad for markets if Joe Biden remains in the lead. There’s a chance Democrats will secure control of both the executive and legislative branches of the U.S. federal government, making it much easier to pass progressive policies.

Top of the priority list is likely to repeal Donald Trump’s corporate tax breaks— a move that would be bad for the stock market no matter how you slice it.

3 Reasons This Stock Market Surge Is About to Make Its Final Gasp, CCN, Jun 15