Top 5 Market Trends to Watch in the Upcoming Week

Investing.com — This week, the U.S. markets will face a significant test as chipmaker Nvidia reports its earnings. U.S. inflation data is expected to reinforce hopes for anticipated rate cuts, while the Eurozone and Australia will also release inflation statistics that will influence interest rate trajectories. Here’s a preview of the market developments for the upcoming week.

1. Nvidia Results
   Investor excitement surrounding artificial intelligence may be challenged when Nvidia announces its earnings on Wednesday after market close. The report will provide insights into whether corporate investments in AI will persist, potentially marking a pivotal moment for market sentiment as we enter a traditionally volatile period of the year. Nvidia’s stock price has soared approximately 150% this year, making up about a quarter of the S&P 500’s 17% gain. However, this surge and the AI hype have led some to draw parallels to the dot-com bubble that burst over 20 years ago. This earnings report follows a season where investors have been less forgiving toward major tech companies like Microsoft, Tesla, and Alphabet, whose shares have declined since their July earnings disclosures.

2. U.S. Data
   The focus of the economic calendar will be Friday’s Personal Consumption Expenditures price index, which is the Federal Reserve’s preferred measure of inflation. In a speech at the Fed’s annual Jackson Hole symposium, Chair Jerome Powell noted recent improvements in inflation and suggested it might be time for policy adjustments. He also emphasized the need for stable labor market conditions, hinting at a possible rate cut at the policy meeting next month, which would mark the first reduction in over four years. Additional economic reports scheduled for the week include data on personal income on Monday and revised second-quarter GDP figures on Thursday, along with the weekly jobless claims report.

3. Eurozone Inflation
   Eurozone inflation figures for August, set to be released on Friday, will play a crucial role in determining the European Central Bank’s interest rate decisions for September. This release follows national inflation reports beginning Thursday and occurs after a slight and unexpected increase in July inflation, indicating ongoing challenges in controlling price growth. While overall inflation is projected to decrease, driven in part by falling oil prices, core inflation and price movements in the services sector will continue to attract scrutiny. Any surprising increases in inflation data could lead to a cautious market stance, as traders have ramped up expectations for an ECB rate cut in recent weeks, with many anticipating a 25-basis point reduction on September 12.

4. Australia Inflation
   Inflation numbers for July from Australia, due on Wednesday, may indicate that headline inflation is returning to the Reserve Bank of Australia’s target range of 2-3% for the first time in three years. If inflationary pressures show signs of abating, attention will likely turn to the central bank, which has been viewed as an outlier in comparison to other central banks that have initiated, or are contemplating rate cuts. Investors will be closely monitoring this data to gauge any potential improvement in consumer sentiment, which has been adversely affected by elevated borrowing costs. Additionally, Tokyo’s inflation report for August is expected on Friday and may provide further insights into Japan’s monetary policy outlook.

5. Gold
   Gold has reached multiple record highs since 2022 and has surged over 20% this year, with prices approaching $3,000 per ounce. The precious metal is often regarded as a safe haven during periods of increased security risks and political or economic uncertainty, and its recent gains can be attributed to a number of converging factors. The onset of the conflict in Ukraine in February 2022 sparked an initial uptick in gold prices, which have been further supported by rising commodity prices and inflation that diminishes the value of fiat currencies. Ongoing tensions in the Middle East and uncertainty surrounding the next U.S. Presidential election are also contributing to gold’s upward movement. Additionally, anticipated U.S. interest rate cuts are applying downward pressure on the dollar, enhancing gold’s appeal, given its historical inverse relationship with the U.S. currency. However, gold investors should remain vigilant, as markets often correct, and it is essential to remember the adage: "nothing goes up in a straight line," which suggests a tendency to "buy the rumor, sell the fact."