US Stock Market, is July the time to rise on a seasonal rally?...Wells Fargo "Buy when AI falls"

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Wall Street has diagnosed that the US stock market could enter a 'summer rally' again, buoyed by July's seasonality and expectations for Q2 earnings. Wells Fargo believes that delays in the IPOs of super-large AI companies, an influx of funds into Trump accounts, improved earnings, and seasonal strength could support further gains, particularly in large-cap stocks.

According to financial media outlet MarketWatch on June 30 (local time), Wells Fargo's strategist team, led by Oh-sung Kwon, issued a strategic report advising investors to prepare for a "strong summer rally." They analyzed that US stocks typically show strong performance in July, and there's no reason for this July to be an exception.

Wells Fargo attributed recent stock volatility to quarter-end rebalancing. At the same time, they noted that political uncertainty could be reflected in the market starting in September, ahead of the US midterm elections in November. However, they assessed that investor sentiment is highly likely to reset in early July.

Seasonality also supported the bullish argument. Wells Fargo explained that the first two weeks of July have shown the strongest seasonality for the S&P 500 (S&P 500 Index, SPX) over the past 100 years, with an average return of 1.35%. Their own investor sentiment indicator has also returned to a neutral level after issuing a sell signal in May.

Delays in the IPOs of super-large AI companies were even interpreted as a positive factor. While the market had considered potential delays in the listings of OpenAI and Anthropic as a negative factor for the Magnificent 7 and tech stocks, Wells Fargo stated, "Buy when AI falls. IPO delays are a bullish factor." The logic is that a decrease in new stock supply, coupled with a reduced need for AI labs to raise token costs for profitability improvement, could sustain computing demand for longer.

Fund flows and earnings were also presented as favorable variables. Wells Fargo estimated that new Trump accounts created for eligible children could generate approximately $20 billion in price-insensitive buying, primarily in US large-cap stocks. They projected Q2 earnings per share growth to be 22% year-over-year, higher than Q1's 19%, and noted that $36 billion in tariff refunds have already been processed, with an additional $90 billion possible. Essential consumer goods and industrial goods were mentioned as industries benefiting from the refunds.

*Related Article: Wall Street Moguls: "US Stock Market, June Correction Ends, July Counterattack Possible"...Whales 'Rotate'

[Article Key Summary]

-Wells Fargo suggested the possibility of a summer rally in the US stock market, based on July seasonality, recovering investor sentiment, and Q2 earnings expectations.

-Delays in the IPOs of super-large AI companies such as OpenAI and Anthropic were interpreted as bullish factors, due to reduced new stock supply and extended computing demand.

-An influx of $20 billion into Trump accounts, a projected 22% growth in Q2 earnings per share, and the effect of tariff refunds were presented as additional drivers for a large-cap-centric rally.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*