Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

The Delta variant is now clearly weighing on investor sentiment as daily headlines from across the globe flash across screens. A USA Basketball player replaced due health and safety reasons. A tennis player testing positive and pulling out from the Tokyo Olympics. The United Kingdom will celebrate its “Freedom Day” on Monday as they roll off the majority of their Covid-19 restrictions for their citizens. Unfortunately, we’ve seen other countries who have more recently celebrated their grand re-openings, such as the Netherlands and Israel, begin to re-impose restrictions as cases with unvaccinated people have surged. Equity market investors are once again back to looking at the “stay at home” vs. “reopening” trade. Is this a flashback of March 2020 all over again? Per the CDC, as of last week about 48% of the U.S. population is now fully vaccinated. Looking back at last March we had not yet even identified a vaccine. The 2020 shutdown came as a surprise to many (who can remember the great toilet paper shortage of 2020?). Both consumers and companies are better prepared than they were last March. Fixed income investors have continued to seek safety as the 10-year U.S. Treasury is now down to 1.22%, back to February levels. The decline in yields have worried some investors which could potentially overshadow another strong earnings season. The S&P 500 has completed its first week of earnings with 41 companies representing about 18% of index earnings reporting. So far so good, as 73% have beaten on Earnings Per Share, 85% have beaten on Sales, and 66% have beaten on both EPS/Sales.

The week ahead will be highlighted by the second busiest week of earnings season as well as housing and if it can continue its blistering pace. For those who have been trying to purchase a home in sunny Southern California, you’re well aware of the competitiveness. Per Redfin, homes are currently being sold within 25 days of listing, down from 45 days in 2019. For some people, it’s a flashback of 2007, however the underlying housing market is in a much healthier spot today. 70% of mortgage originations currently are for borrowers with credit scores of 760+ compared to the low 20%’s back in 2006. Additionally, home construction over the past decade is down 45% versus in the decade (1996-2006) prior to the Great Financial Crisis which speaks to the low inventory available.

Data deck for July 17–July 23