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The Week Ahead: Traders Pricing Calm Markets at Highs, Will They Be Right?
Trading Calendar: Week of July 21th, 2025
RiskReversal Media
July 20, 2025
This Week
Last week wrapped up with a modest gain for the SPX, enough to notch new closing highs during the week, with the index now hanging out near the top of a multi-week consolidation range. That consolidation could be resolved by month end, especially with some major catalysts on deck as July turns to August. As for this week, it doesn’t bring much in terms of economic data, but it does feature a busy earnings slate. We’ll get into what’s coming up in a minute, but first a quick look at the weekend—relatively quiet overall, though there were a few reminders out of the EU that the August 1st tariff deadline is fast approaching, without many finalized deals in sight.
EU to Prepare Retaliation Plan as US Trade Stance Hardens (Bloomberg)
European Union envoys are set to meet as early as this week to formulate a plan for measures to respond to a possible no-deal scenario with US President Donald Trump, whose tariff negotiating position is seen to have stiffened ahead of an Aug. 1 deadline. The overwhelming preference is to keep negotiations with Washington on track in a bid for an outcome to the impasse ahead of next month’s deadline. Still, efforts have yet to yield sustained progress following talks in Washington last week, according to people familiar with the matter. Negotiations will continue over the next two weeks. The US is now seen to want a near-universal tariff on EU goods higher than 10%, with increasingly fewer exemptions limited to aviation, some medical devices and generic medicines, several spirits, and a specific set of manufacturing equipment that the US needs, said the people, who spoke on condition of anonymity to discuss private deliberations.
‘Priced for Perfection’: Tariffs Loom Over Richly Valued Stocks (Bloomberg)
The conventional wisdom on Wall Street appears to be that the US stock market’s latest march to records has been unabated because, when it comes to tariff threats, President Donald Trump talks loudly but carries a small stick. Yet, regardless of what the levies on imports from remaining trading partners end up being when Trump makes his final decisions, some prominent voices in the market say investors are underestimating the risks even from tariffs that are already in place. Duties paid by US importers have jumped to an average rate of more than 13%, over five times where they were last year, Bloomberg Economics estimates. Higher tariffs are enough to slash 5% or more from corporate earnings growth, according to Alastair Pinder, head of global equity strategy at HSBC. With the S&P 500 Index trading at about 22 times forward earnings, near its richest valuations in the post-Covid era, the concern is that any disappointments in corporate profits and economic data during the remainder of the year could pull the rug out from under the latest rally.
How Bessent Made the Case to Trump Against Firing Fed Chair Powell (WSJ)
Treasury Secretary Scott Bessent in recent days privately laid out his case to President Trump for why he believed Trump shouldn’t try to oust Federal Reserve Chair Jerome Powell, people familiar with the matter said. Bessent’s reasons for avoiding a messy dispute over Powell’s final 10 months as Fed chair focused on a few themes: the possible effects on the economy and markets, the prospect that the Fed is already moving toward cutting interest rates later this year, and the likely political and legal obstacles that such a move would face, these people said.
In recent layoffs, AI’s role may be bigger than companies are letting on (CNBC)
As rounds of layoffs continue within a historically strong stock market and resilient economy, it is still uncommon for companies to link job cuts directly to AI replacement technology. IBM was an outlier when its CEO told the Wall Street Journal in May that 200 HR employees were let go and replaced with AI chatbots, while also stating that the company’s overall headcount is up as it reinvests elsewhere. Fintech company Klarna has been among the most transparent in discussing how AI is transforming – and shrinking – its workforce. “The truth is, the company has shrunk from about 5,000 to now almost 3,000 employees,” Klarna CEO Sebastian Siemiatkowski told CNBC’s “Power Lunch” in May. “If you go to LinkedIn and look at the jobs, you’ll see how we’re shrinking.” But employment experts suspect that IBM and Klarna are not alone in AI-related purges. It’s just that firms often limit their explanations to terms like reorganization, restructuring, and optimization, and that terminology could be AI in disguise.
Berkshire Hathaway continues to underperform after Buffett’s exit news, now trailing the S&P 500 (CNBC)
Berkshire Hathaway ’s underperformance in share price has continued since Warren Buffett’s exit news, now falling behind the S&P 500 in 2025. The Omaha-based conglomerate’s B shares have suffered six negative weeks in the past seven, on track for its third straight negative month. Since May 3, when the “Oracle of Omaha” announced his plans to hand over the reins, the stock of his conglomerate has fallen more than 12%, cutting year-to-date gains to 4.5%, trailing the S&P 500′s 7% increase.
Trump Aides Discussed Ending Some SpaceX Contracts, but Found Most Were Vital (WSJ)
For the U.S. government, breaking up with Elon Musk is easier said than done. Just days after President Trump in early June raised the prospect of cutting ties with Musk’s businesses, the Trump administration initiated a review of SpaceX’s contracts with the federal government, according to people familiar with the matter. The review was intended to identify potential waste in the multibillion-dollar agreements the company has with the government, the people said.
Dollar Rethink Is Pushing Emerging World to Sell More Euro Debt (Bloomberg)
Emerging-market borrowers are tapping the euro bond market at the fastest pace in over a decade, capitalizing on the rising demand for diversification away from the US dollar. The surge is being fueled by robust demand for developing debt, with non-dedicated investors playing a bigger role as credit quality improves. While euro-denominated bonds still account for a small share of total emerging-market supply, their volume is expected to remain high — both in absolute terms and relative to dollar-denominated deals.
Bank Earnings Are Sending a Message: The Economy Isn’t That Bad (Barron’s)
Quarterly report cards from the largest, most systemically important U.S. banks brought investors and consumers welcome news this past week. The message: The economy is faring better than it feels. Management was generally optimistic about the state of their businesses, against the odds.
Short duration volatility is extremely low going into this week, with the SPX/SPY expected move of just 1.1% one of the smallest we’ve seen all year. This is summer market type pricing compounded by the fact that although we’ve seen some uptick in sector and single stock volatility the past two weeks, the broader market has been extremely non-volatile day to day.
This Week’s Expected Moves:
SPX/SPY: 1.1% (6225-6375)
QQQ: 1.4%
IWM: 2%
TLT: 1.4%
USO: 2.7%
A couple quick things to point out from the above: we're seeing some of the smallest expected moves in months—not just in equities, but even in assets like oil. USO’s implied move this week is just 2.7%, down from 4% last week and 6%+ weekly expected moves in June. Volatility dropped in other areas as well, , with the dollar, gold, and more seeing big declines in expected movement last week.
Looking ahead to this week, there’s a reason for that low vol as the U.S. economic calendar is pretty light, and while we will hear from a few Fed speakers—including Powell—they’re in the quiet period ahead of the July 30th rate decision so they won’t move markets:
Economic Calendar:
Wednesday
10am - Existing Home Sales
Thursday
8:15am - ECB Rate Decision
9:45am - S&P Global PMI
10am - New Home Sales
Friday
8:30am - Durable Goods
A ton of companies reporting this week, highlighted by Tesla and Alphabet on Wednesday. The mix is across almost every sector so we’ll have a pretty good sense of how investors are reacting to reports by the end of this week:
Earnings (with expected moves):
Monday
Pre-market: VZ 3.5%, DPZ 4%
Tuesday
Pre-market: GM 5.5%, KO 2.6%, LMT 4.4%
After-hours: TXN 5.2%, ISRG 6.5%, COF 4.6%
Wednesday
Pre-market: T 4.5%
After-hours: TSLA 6.9%, GOOGL 5.5%, IBM 6.5%, CMG 6.6%, NOW 7%
Thursday
Pre-market: BX 4.2%, AAL 6.6%, LUV 6%
After-hours: INTC 7.6%, NEM 5.8%
Friday
Pre-market: AN 6%
One last note: When the market is pricing in low volatility, it often reflects what just happened more than what’s ahead. That seems to be the case here—last week’s SPX action was pinned around 6300 into a big monthly expiration, which helped suppress both realized moves and short-term vol pricing.
Now that expiration is behind us, the setup shifts to one that’s more open to a sharper move. Historically, volatility tends to revert after large expiries—whether the lead-in was quiet or chaotic—so even if things stay calm early this week, the odds of a pickup are rising. The market is currently focused on the July 30th Fed Decision and the August 1st tariff deadline for a potential volatility spike, but any unexpected trade headlines this week could easily bring that forward.
