In July, the S&P 500 and the Nasdaq marked their fifth successive positive month. Impressively, the Dow recorded a 13-day advance last month, matching the index’s longest streak of gains. This is the backdrop with which door has opened for August to investors.

According to moneychimp.com, a consensus carried out from 1950 to 2022 has revealed that August ended up offering positive returns in 43 years and negative returns in 30 years, with an average return of positive 0.85%, a moderate monthly performance.

Against this backdrop, investors may be interested to know what lies ahead for Wall Street for the month of August. Let’s delve a little deeper.

Corporate Earnings

Per Zacks Earnings Trends issued on Jul 26, 2023, for the 151 S&P 500 companies that have reported Q2 results, total earnings are up 3.1% from the same period last year on 6.9% higher revenues, with 81.5% beating EPS estimates and 63.6% beating revenue estimates. In a word, despite several headwinds, earnings picture remains decent and we may see such decent trend in August too. WisdomTree U.S. Large-Cap Fund EPS should thus be closely watched.

U.S. Economy in Good Shape

The American economy surprisingly picked up steam in the second quarter, thanks to resilience among consumers and businesses in the face of high interest rates. This is especially true as the GDP grew 2.4% annually from 2% growth in the first quarter. Moderating inflation and a solid job market fueled optimism. Consumer Discretionary Select Sector SPDR Fund XLY should thus be closely followed in August.

Can Inflation Soften Further?

Fed’s preferred inflation measure showed cooling price increases in June. The Personal Consumption Expenditures (PCE) Index grew 3.0% year over year in June, down from 3.8% the month prior and in line with expectations. “Core” PCE, which bars the volatile food and energy categories, grew 4.1%, down from 4.6% from the month prior and below the 4.2% economists surveyed by Bloomberg had expected, as quoted on Yahoo Finance.

So, investors’ eyes will be on the inflation reading in August. Such a scenario puts focus on the likes of Amplify Inflation Fighter ETF IWIN .

Where Will Greenback Head if the Fed Rate Hikes Slow?

The greenback has had a moderate-to-downbeat run with the Invesco DB US Dollar Index Bullish Fund UUP losing about 0.7% past month (as of Jul 31, 2023). But the gains cooled off in July. With the cues of slower or no Fed rate hikes going forward, the BOJ easing YCC and the ECB policy tightening in place, we may see further moderation in the strength of the U.S. dollar in the coming days.

Can Oil Keep Up Momentum After a Strong July?

WTI crude ETF United States Oil Fund LP USO jumped about 15% in July while United States Brent Oil Fund, LP BNO gained about 14%. Hence, July marked the best month for oil in more than a year. The price of oil remained strong as global crude consumption is expected to rise.

Policy easing in China, better U.S. and Euro zone growth boosted demand outlook while Saudi kept supplies tight. Stronger stock markets as well as a weaker greenback supported commodities like oil. If the situation persists, we may see a surge in oil prices in August.

European Market Under Watch After Better Growth

The Eurozone economy grew 0.3% in Q2 of 2023 after a flat first quarter, slightly surpassing market consensus of a 0.2% expansion. Colling inflation helped recovery. However, higher interest rates and waning confidence continued to weigh on the single currency’s economy. The ECB already indicated that more hikes are possible as inflation remains stocky. So, movement in Invesco CurrencyShares Euro Currency Trust FXE should be under watch.

Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports

Invesco CurrencyShares Euro Trust (FXE): ETF Research Reports

United States Oil ETF (USO): ETF Research Reports

Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports

United States Brent Oil ETF (BNO): ETF Research Reports

WisdomTree U.S. LargeCap ETF (EPS): ETF Research Reports

Amplify Inflation Fighter ETF (IWIN): ETF Research Reports

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Zacks Investment Research

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