Next Week’s Market Forecast
Last time I spoke of a market scare, oil prices hovered below $60. Now they’re up around $110. And the big indexes were much lower than now.
Caution for Investors This Week (June 18th)
Friday’s stock price stumble on the exchanges reflects a lot of uncertainty swirling around the markets. Investors might want to cautious.
There are plenty of signals flashing.
Consider the last time oil prices were this high (in March), the index took a tumble. Iran’s regime seems to have the straight of Hormuz closed to oil tankers making it seem likely oil could rise to record heights.
Reports on inflation were not good (up 3.8%) and it doesn’t look like any good news is likely. Iran’s regime feels empowered and wants to entrench. This war or truce is into 2 months now, and if President Trump doesn’t respond to ensure it ends and the straight is opened, that could be the key signal.
It only takes a few reports/announcements to give motion to the energy shock fear at a time when consumers are hurting.
Corporate earnings were good (27% above expectations), and 1st quarter US GDP was strong (2.0%) meaning there is industry demand among a lack of supply. Prices are getting high enough that this is an emergency situation for consumers where they feel beaten and in trouble – a situation where investors could unload overvalued equities, especially AI infrastructure stocks.
We’ve seen some tech stocks go parabolic and they are at risk of a big correction if consumer and investor sentiment go sour suddenly. With all of these factors gaining in intensity, it’s no wonder more analysts, gurus, forecasters and fund managers are sounding the alarm bell.
Stocks did close out last week down, and firmly on Friday afternoon. Something might be wrong.
The Street.com said:
“The Equal Weight S&P 500 (RSP) lagged the cap-weighted (SPY) by a small margin, which reflected the broad selling. There were no clear signs of rotation other than Microsoft (MSFT) and Apple (AAPL), which finished with gains. The stocks that did not participate in the run from April were getting hit hard and are not viewed as bargains at this point. Cash was leaving the market rather than moving within it.”
They feel investors will be watching the 10-year bond yield and oil prices on Monday, before making a decision. What could happen where this would not be the case? A Thestreet.com report says money is leaving the stock market.
When the FED speaks: If the new FED chair speaks of caution and interest rate hikes, that might be enough to upset this record bull run, at least for a short while. This correction could of course, give you a buy the dip opportunity if you have cash ready to use.
It’s not a bad time to review what could cause a stock market crash. Because, we’re sitting at record high heights, with lofty analyst and economist predictions.
There are more references of recent to the .com crash in 2000.
- The cyclically adjusted price-to-earnings (CAPE) ratio, (Shiller PE) as of early May had a CAPE ratio of 39.6, not seen since the .com crash in 2000.
- Surging global bond yields are triggering a major market warning, as the 10-year U.S. Treasury yield recently spiked to 4.59% and the 30-year bond breached 5%.
- Investor greed is high and a lot of people are gambling, particularly on AI stocks which do not have the earnings to justify their valuations. It’s all speculation by euphoric investors.
Analysts are mentioning a pullback later in the year, but what if events are ripe enough to bring that forward to now?
What do you think might drive a correction this week? Are you considering selling on Monday?
If investors feel their confidence waning, will it be enough to send them to the exits?
Trump and XI Both Had a More Friendly Visit
Trump and Xi met once again in a hyped trade talks meeting in China. There was talk of purchases, but it was all on China buying US goods.
100% tariffs on the biggest trade partners is a major event. The reason we’re not seeing equities fall further is mostly denial, and a continuing exuberance and FOMO driven unrealism. Investors still believe the US is in the best growth scenario in decades with more to come. And US dominance in AI is the icing on the cake (see more on the best AI stocks to buy and AI small caps for even bigger gains). Valuations are grossly high and the markets are defined by a limited set of stocks. If a mood of negativity takes hold, consumers may pull back. Consider too, that it is wealthy consumers driving the retail markets. And with a continuing government shutdown and the implications for trade are obvious.
The long term outlook is good, which will help control a cataclysmic sell off. The 2026 economy and stock market await.
Caution: Stocks Beyond Peak with Rich Valuations
The peak prices and rich valuations doesn’t mean a market crash would happen, but with the tariff implementation and prices above support levels, a short-term correction seems logical. There’s no telling when hedge fund managers and other institutional investors will sell-off and harvest some profits. They likely know a correction will happen and would like to make some money on that.
Sectors to Watch
Materials, industrials, technology, real estate, and consumer discretionary stocks took the biggest fall, while only energy stocks enjoyed a lift. Given many investors won’t invest in oil stocks, the strength of oil stocks is likely understated.
See more on the 3 month, 6 month, and 5 year stock market outlooks, and the current stock market forecast.
Next week’s events from TradingView
Weekly forecast hunters are pursuing clues about the direction of the Dow Jones, S&P, and NASDAQ for specific stocks or ETF’s worth buying or those they should dump. The NASDAQ, S&P, Russell, and Dow Jones are all looking positive right now, and the stock market forecast is looking much brighter as the FED pulls back on its injury of the US economy.
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