5 stock market trends to watch this summer

As the 2023 summer season approaches, Yahoo Finance's Brian Sozzi breaks down 5 stock market trends to watch this summer. Ben Laidler, eToro Global Markets Strategist, and Tom Essaye, Sevens Report Research Founder and President, join Yahoo Finance Live to discuss what they're watching this summer.

Video transcript

BRAD SMITH: But we've got to shift gears here as summer is right around the corner this morning. So what should investors be keeping an eye on is the big question. Our executive editor Brian Sozzi has a list of five key trends to watch out for between your vacations and beach days, and he's here with us now.

Also, we've got eToro's Ben Laidler and Tom Essaye from the Sevens Report. They're still with us. They've stuck around. Thanks so much. All right, so help us walk through some of what you had to write this morning, Sozzi as well, just in the fact that there is a lot to be keeping an eye on over the course of this summer.

BRIAN SOZZI: Yeah, let me just tee this one up for the team. I actually cut this list down from 25 down to five. There's a lot of things happening in the markets this summer. I'll start with Target. I'm watching Target share. Stock's down about 14% in the past two weeks as I think concern builds on Wall Street on two fronts.

First, a sales impact from the consumer backlash we are seeing from them pulling LGBTQ+ merchandise from their stores a couple of weeks ago. How does sales look like in the second quarter? And then this falls into my second thing to watch that I mentioned in the newsletter. What is the impact to companies like Target that sell discretionary stuff as students start to repay their student loans in early September? That is real money that could come out of the registers of these retailers. By some estimates $400 or $500 a month could be the payments that a lot of college students have to start paying back. That is less money for many retailers.

Next up, I'm also watching AI stocks, and I'm pumped to see Ben Axler, noted short seller, on our programming later on today to talk about his case against C3 AI because I think you will see a differentiation between companies like C3 that maybe are on the edge of the AI-- generative AI movement, maybe not even doing anything related to generative AI. But then big companies, more established companies like Hewlett-Packard trying to reinvent computers for the future of AI in various new powerful chips.

And then lastly, of course, I'm watching Apple stock on-- with WWC well underway. What is the market? How do estimates change as maybe some optimism starts to build regarding this new AR headset? And of course, the Fed-- that Fed meeting is coming up very, very soon. Expectations have been the Fed keeps-- does not raise rates at its next meeting, and I think that's what the market is melting up on. I could've went 25.

JULIE HYMAN: No, you couldn't.

BRIAN SOZZI: I could.

JULIE HYMAN: No, you absolutely couldn't. People-- no, that's too much to keep track of, dude.

BRIAN SOZZI: No?

JULIE HYMAN: All right, so let's get to our guests then. Back to our guests. Ben, what are you watching over the summer? Is there something you're zeroing in on that you think maybe people have overlooked a little bit or that should be paying more attention to?

BEN LAIDLER: So I think the economic slowdown is going to arrive, and I think one of the takeaways from Friday, right, is that it tells you how concerned investors are about that, right? We get better jobs market numbers, and instead of selling off, markets rally. That tells me that markets are and investors are, you know, very, very focused on the economy.

I think the slowdown is coming. It's inevitable, I think, with rates of 5%, with tightening lending standards, with the spending cuts coming from the debt ceiling bill. So I think at some point over the summer, we're going to see worse economic data. I'm not sure that's necessarily bad for the market, but I think that's coming.

We're going to get lower, volume lower-- you know, we're going to get some seasonality. People are worried about that. I think, Julie, volumes never traditionally fall as much as people think. And markets don't necessarily perform that badly, right? It's just more that it's not that very bullish fourth quarter as we reposition for the year ahead and it's not that very bullish first quarter with companies telling us all the fantastic things they're going to do this year. So I guess sort of seasonality and economic slowdown, those are the two things I'm watching.

BRAD SMITH: Is Tom, from your perspective, the Fed the looming cloud over the summer forecast here?

TOM ESSAYE: No, I don't think so. I think the Fed is sort of the third in my list of things I'm worried about this summer, and it's a flip from last year, right, where the Fed was really driving the market. This year, the data is driving the Fed. And so I think growth obviously-- how much do we slow during the summer?

But then also that core services inflation because, at the end of the day, you're looking at core CPI still over 5%. Now, that'll come down gradually because of base effects as we roll the calendar. But at the end of the day, the Fed is not going to be able to sort of announce this dovish pivot that everybody's going to start hoping for in a couple of months until you get inflation down to some sort of an acceptable level.

And I think that, for me, is one of the wild cards out there. It seems like people have kind of forgot about inflation, right? It's just sort of-- this disinflation is assumed. And we have come down in inflation, but we've got to keep going. You know, 5% is not good enough. You know, we've got to keep going down. So I think inflation could pop back up this summer as a market influence.

BRIAN SOZZI: Tom, Brian here. In the newsletter this morning, like I just mentioned, we talk about Apple and how important that is to the market. But we're also seeing really melt-ups across the tech space. Valuations have gone up significantly. How concerned are you that we are looking at a potential 2000 type of situation here? You know, we saw this run up in 1999, and this might be to some starting to feel similar.

TOM ESSAYE: Hi. Good morning, Brian. Yeah, I'm not worried about it yet mainly because I think that tech was coming out of such a hole from last year. The AI euphoria makes me a bit nervous, but this is somebody who has been through various waves of tech euphoria in my career that haven't always come to fruition. It seems like the really big things kind of come out of nowhere sometimes. So the pure momentum and sort of fervor behind AI just makes me a bit nervous. I get that it's transformational and all that. But I don't think we're at valuation levels that would make me super, super nervous on tech broadly.

The one caveat here is on yield, right? Part of the reason the tech is outperformed this year is because yields have come off recent, recent highs. If you have yields go back-- which goes back to my inflation point. If you have yields start rallying again, tech's going to get hit kind of regardless of how awesome ChatGPT or AI is.

JULIE HYMAN: Guys, thanks so much. Really fun stuff with you both this morning. Ben Laidler, eToro global market strategist and Tom Essaye, Sevens Report Research founder and president. Also, Yahoo Finance executive editor Brian Sozzi. Thanks, guys.