As the second quarter of the year comes to a close, the main stock indexes continue to rise as a result of the following factors:

1. A U.S. economy that is showing signs of a soft landing as inflation gradually eases towards 2%.

2. The Federal Reserve (FED) is entering the second half of the year with degrees of freedom by setting a 25 basis point decrease in the monetary policy rate for the remainder of the year (from the current overnight rate level of 5. 5%).

3. Sales and profits of S&P 500 companies are estimated to grow in the order of 5% and 11.3%, respectively.

4. The revolution associated with artificial intelligence continues to spread in different directions throughout the economy.

5. The tense geopolitical and war environment has failed to generate a high degree of uncertainty on market valuation.

It is in this environment that the S&P 500 and Nasdaq indices once again reached all-time highs the previous week before taking a brief breather on Friday. These indexes accumulated returns of 14.6% and 17.8%, respectively, in an environment where the microprocessor company Nvidia reached the scepter of largest company with market capitalization, surpassing Apple and Microsoft. In the meantime, the Dow index has accumulated a return of close to 4%. Meanwhile, the 10-year sovereign rate continues to hover around 4.25%, while sovereign rates for less than a year are above 5%, suggesting that high inflation could persist slightly longer than expected. Meanwhile, even as oil prices have risen above US$80 a barrel again, wheat and corn prices have surprisingly declined by an average of -4%, despite the relentless high temperatures in the northern hemisphere in recent weeks. 

This week ahead the focus will be on the following:

• Quarterly results from Carnival, Fedex, H&M, Nike and Walgreens Boots will give a preview of domestic and global demand. Fedex's results will give us a glimpse of US demand in an environment where gasoline prices are not easing while Nike will outline inventory build-up with global demand slowing.

• Friday's PCE inflation figures will be released where the headline figure is expected to have marginally eased to 2. 6% y/y (YoY) and the core figure, that which excludes food and energy prices, would be at 2.7% y/y also marginally easing.

• On the political front on one hand on Thursday night the CNN news network will be broadcasting the first of three debates between President Biden and former President Trump ahead of the November 5th presidential election. Meanwhile, there will also be political action in the United Kingdom in preparation for the elections to be held on July 4.

At the same time, the first round of elections in France will take place during the weekend, where it is estimated that the most radical right wing could be taking a more prominent role in the country's administration.

While the focus is still on the evolution of artificial intelligence where Apple is reportedly reaching a second agreement, this time with Meta to also incorporate its services to its Apple Intelligence division in addition to Microsoft's services through OpenAI, the traditional automotive industry suffered an unprecedented cyber-attack in recent days. It is estimated that approximately 15,000 automotive sales and parts stores were left without any system for both customer service and parts inventory. The hackers demanded millions of dollars in compensation to unlock the software, a payment that apparently occurred over the weekend. Boeing announced last Friday that the two astronauts it sent to the spacecraft in mid-month will have to wait to return until at least early July.

This after the company is still analyzing the problems it had with some valves on the spacecraft that will have to be revised for the return. We must not forget that the company has not had good results compared to Space X despite having received subsidies from the U.S. government. This was the main focus of the participation of its CEO, Dave Calhoun, in front of the Senate last week. 

On the geopolitical front, the debate between presidential candidates Biden and Trump will clarify the agendas that both have regarding inflation and immigration, two of the major issues that have been at the center of the discussion for several consecutive years and that are central to voters' minds. For now, and as we mentioned in our previous week's edition, it would seem that on the inflation front, the Federal Reserve (FED) could wait until its November 6-7 meeting to lower the rate so as not to "interfere" in the presidential process.

Trump has already alluded on several occasions that the FED could be favoring Biden if it chooses to reduce the instance rate even though the impact on the economy will be felt at the end of the year due to the multiplier effect. So a cut before the election would be good for either candidate. Even so, the Fed cannot get the inflation evolution flagrantly wrong, since lowering the interest rate prematurely would become a problem for any of the presidencies. Therefore, the Fed will most likely wait until September before changing its anti-inflation rhetoric. 

In conclusion, this week market players will be analyzing in detail the quarterly results of two of the most important U.S. companies, Fedex and Nike, which will give us the temperature of domestic and global demand, in order to determine if the market valuation is adequate.

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