US Stock Futures Outlook: Fed Expectations and Earnings Keep Bias Positive
In my opinion, the short-term price outlook remains cautiously bullish. Optimism about upcoming earnings and expectations of an H1 2026 Fed rate cut support the positive outlook. These fundamentals align with constructive technicals.
Additionally, increased speculation about an incoming Fed Chair favoring lower interest rates in an elevated inflation backdrop reinforces the constructive medium-term bias.
However, several events would derail the bullish medium-term outlook, including:
- The Bank of Japan announces a hawkish neutral interest rate (potentially 1.5%-2.5%). A narrower US-Japan rate differential may trigger a yen carry trade unwind, unraveling the short-term outlook.
- Strong US economic indicators and hawkish Fed rhetoric would reduce bets on multiple Fed rate cuts.
- Corporate earnings and outlooks disappoint.
- Geopolitical tensions escalate.
- If the US Supreme Court rules tariffs illegal, it will likely raise concerns over US debt.
Conclusion: Cautiously Bullish Bias
In summary, a robust US economy, a dovish Fed rate path, earnings expectations, and a less hawkish BoJ reaffirm a cautiously positive short-term and a bullish medium-term outlook for US stock futures.
Nevertheless, traders should monitor 10-year JGB yields, USD/JPY trends, and the Nikkei 225, given the short-term effects of yen carry trades on market liquidity. Yen intervention threats and hawkish BoJ signals may fuel concerns about a yen carry trade unwind, weighing on US risk assets.
Key levels to watch include a USD/JPY drop below 150, 10-year JGB yields climbing to new highs, and a sharp Nikkei sell-off. These would be early signs of an unwind, weighing on buyer appetite for US risk assets.
Despite speculation about BoJ rate hikes, US stock futures are likely to visit new highs, with earnings and the Fed the key drivers.
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