As earnings reports roll in over the next few weeks, the $10 trillion global stock market will face a crucial test, according to an article in Bloomberg. S&P 500 companies are forecasting a profit loss of 9% for the second quarter, and the drop may be as big as 12% in Europe.

What will happen next is up for debate. Some strategists are skeptical that companies will be able to rebound in the second half of the year, and market watchers will be paying careful attention to following:

The AI Effect. While the AI craze fueled the Nasdaq 100 to a record first-half, it remains to be seen whether the enthusiasm for AI will have a lasting effect on earnings. The major market leaders—Apple, Microsoft, Amazon, Nvidia, and Alphabet—are predicting the biggest earnings growth for U.S. companies in the second quarter.

Inflation Factor. While there are signs that inflation is cooling and the Fed could reverse their rate hikes, companies’ operating expenses are still high. Strategists will be paying special attention to “the interaction of wage growth with the price inflation for whether businesses remain under pressure,” Rob Haworth of US Bank Wealth Management told Bloomberg.

Consumer Spending. Sentiment around consumer spending will be another area of focus, which has slowed down since the beginning of the year, after adjusting for inflation. Technology companies are expecting a contraction in demand for products for the rest of the year, which could mean that the 2024 rebound many are hoping for may not happen.

Slowing Performance in Europe. According to Barclays Plc strategists cited in the article, profits across Europe are forecasted to fall even further than in the U.S. The Euro and the Swiss franc are strengthening, putting pressure on exporters. Regional stocks are still appealing given their cheap valuations, but the lack of tech stocks may keep things volatile.

Rough Rebound for China. While China’s car makers are a high point in the economy, tech firms are expected to post weak results because of the slump in the global chip market. China’s economy also hasn’t rebounded as much as the rest of the world. Meanwhile, strategists will be looking closely at international firms that have major exposure to China, like European luxury giants Burberry Group, LVMH, and Kering SA, the article contends.