A summer stock crash is now the phrase making the rounds on Wall Street, and it is worth asking why. Right now, record Wall Street bullishness is running straight into a pile of stock market risks just as Q2 earnings season gets going, and JPMorgan technical strategist Jason Hunter thinks that combination could set off a real stock market correction. Nearly 60% of S&P 500 stocks currently carry a Buy rating, the highest share on record, and that alone tells you how stretched sentiment has become. At the time of writing, two separate trends, a wobble in tech hyperscaler names and a slide in copper, are doing most of the damage to that confidence.
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Summer Stock Crash Risks Grow As Q2 Earnings Begin
Hyperscalers Show Cracks In The Bull Run
The Magnificent Seven stocks, the group that pretty much carried this stretch of Wall Street bullishness on its back, have wobbled lately, and hard. The Roundhill Magnificent Seven ETF dropped 9% in June alone, and steep declines hit Amazon, Meta, Alphabet and also Apple. Hunter linked this wobble to one of the bigger stock market risks he is tracking this summer, an uneven pattern he says looks a lot like 1999.
Jason Hunter, JPMorgan technical strategist, said:
“The growing divergence that exists now and the outright negative hyperscalers price performance are reminiscent of the 1999-2000 dynamic.”
Jason Hunter added:
“The setup keeps our focus on the individual hyperscalers’ charts, waiting to see if those stocks find some footing this summer and potentially reduce the risk that the market could face a sentiment and position driven setback into the fall.”
That is not exactly a comforting read for anyone hoping this summer stock crash talk fades quietly.
Copper Adds Weight To The Stock Market Correction Case
Copper, nicknamed Doctor Copper because of its reputation as an economic bellwether, is on pace for a third straight weekly decline, even though it is still up 8% for the year. This is the second piece of the summer stock crash puzzle, and Hunter treats it as an early signal, not a coincidence.
Jason Hunter stated:
“The potential top pattern forming in industrial metals charts is the second risk we are watching this summer, as copper and other base metals performance historically has done a good job acting as a leading indicator for the global manufacturing cycle.”
Put the hyperscaler wobble next to the copper slide and you get a fuller picture of the stock market risks building under a market that still looks bullish on the surface.
Wall Street’s Bullish Ratings Hit A Record
Wall Street bullishness also shows up in analyst ratings, and it is climbing. Creative Planning chief market strategist Charlie Bilello found nearly 60% of S&P 500 stocks now carry a Buy rating, the highest share on record, while Hold ratings have fallen steadily this year and Sell ratings barely moved at all. Analysts expect S&P 500 earnings per share to grow 22% year over year this Q2 earnings season, the highest estimate heading into a reporting stretch since 2021, and that is a high bar for any company to clear.
Charlie Bilello said:
“When everyone is expecting good news, there’s less room for positive surprises. That’s the setup entering Q2 earnings season.”
So the question becomes whether this summer stock crash idea is overblown, or whether it is an early warning nobody much wants to hear.
Goldman Sachs’ Ben Snider takes a calmer view of these same stock market risks, arguing that a strong economy and continued AI spending could still carry earnings past the high bar Wall Street set for itself. He said:
“A solid macro backdrop and the ongoing AI investment boom should lead to another quarter of strong earnings results despite an elevated hurdle set by analyst estimates.”
Whether hyperscaler weakness, a fading copper trade and record high bullish ratings actually turn into a summer stock crash will depend on what companies report over the next few weeks. If this q2 earnings season disappoints even slightly, the stock market correction some strategists are bracing for could arrive fast, and a lot of that record Wall Street bullishness would need to unwind in a hurry. For now, the summer stock crash conversation is still just that, a conversation, but it is one more traders are having out loud.
