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Here’s my take on market sentiment over the next three months.

First, in the very short-run, for the next four weeks of earnings season, it’s hard for me to imagine that investors and traders will sell ahead of one of the biggest surges in year over year earnings growth–ever. As of June 21 Yardeni Research was projecting year over year earning growth of 64.45 for the second quarter, FactSet report that Wall Street analysts have raised their earnings by 7.3% for the second quarter during the run of the quarter–that’s the highest increase in estimates for a quarter in FactSet records. I think the odds are very high that investors will stick around for second quarter earnings reports–and on the chance of substantial earnings surprises–for the earnings season that begins with JPMorgan Chase (JPM) before the market open on July 13 and that runs, roughly, let’s say until Nvidia (NVDA) reports its earnings on August 18.

After that? Sentiment for the remainder of August and into the middle of September is likely to be more negative than in during earnings season.

One big question is whether investors and traders who held on to reap the benefits of second quarter earnings growth decide to sell on the news–or not. Earnings growth is still projected at well above 30% year over year for the third quarter but that would be a big drop from the earnings growth rate in the second quarter. If stocks climb on second quarter earnings reports, it’s quite possible that we’d get some selling as extended valuations have become more extended and as valuations aren’t supported by 60%+ year over year earnings growth.

Earnings growth from energy companies are a huge component in those projected quarterly earnings growth rates. An OPEC agreement that leads to a drop in oil prices from the current level near $75 a barrel would take some of the starch out of energy sector earnings growth estimates. Which would add to negative sentiment.

The strength of the dollar is a big wild card. A stronger dollar would cut into earnings and revenue at commodity companies (including oil producers) and push sentiment on emerging markets into negative territory.

But, on the other hand, a drop in commodity prices and a strengthening of the dollar would lessen odds that the Federal Reserve would raise interest rates sooner rather than later.

And we might even see a continuation of the rally in Treasury prices and a downward trend in Treasury yields on a stronger dollar, weaker fears of inflation, and less worry about the Fed.

I’m still inclined to see market sentiment ratcheting lower in the August to mid-September time frame because of the uncertainty surrounding two big central bank events, the August 26-28 gathering of global central banks in Jackson Hole, Wyoming and the September 22 meeting of the Fed’s interest rate setting body, the Open Market Committee. There are, by my count, a significant number of investors and traders who think the Fed might raise interest rates in the period–or at least signal an intention to do that–to put the market on edge.

My take is that whereas I’m comfortable with making some relatively aggressive short-term trades during second quarter earnings season, I’d be looking to take risk off the table in late August and in the first half of September.

And after that?

So much will depend on the strength of the U.S. economy–is growth hot enough to encourage the Federal Reserve to think about raising interest rates?

And so much depends on the course of the Pandemic. Do we get another wave of cases, hospitalizations, and deaths as a result of new variants as we move into winter and living, working, shopping, and socializing in close quarters again?

I don’t know. But that uncertainty doesn’t me want to rush out of add risk in the last quarter of the year.

At least that’s how I see market sentiment now, on July 6.

It’s all subject to change on a dime. Which, of course, is its own problem for investors.