3 Things That Could Break the Summer Rally

Global markets enter the second half of the year with strong momentum driven by solid growth, robust earnings, and a historical seasonal tailwind that has prevented an S&P 500 decline in July since 2014. Despite this optimism, three specific risks could disrupt the current stability. First, if U.S. inflation remains sticky, the Federal Reserve might implement an unexpected rate hike on July 29th rather than remaining on hold. Second, the massive AI infrastructure spending cycle—projected to reach $1.2 trillion next year—could face a setback if major hyperscalers show hesitation during upcoming earnings reports. Finally, renewed hostilities involving Iran threaten to destabilize oil prices, a risk compounded by the U.S. Strategic Petroleum Reserve sitting at record lows. While the base case remains positive, these deviations in monetary policy, tech capital expenditure, and geopolitical stability represent the primary threats to a quiet summer market.