Skip to Main

06/05/2023 Market Strategy

  • John Stoltzfus
  • June 5, 2023

Is That All There Is?

With some significant hurdles overcome more remains to be revealed

Key Takeaways

  • With 495 or 99% of the firms in the S&P 500 index having reported first quarter earnings, those firms have reported profits 3.3% lower than a year ago despite revenue growth of 4.25%.
  • Among the 11 sectors of the S&P 500, four are showing earnings growth while seven are seeing declines. Three sectors are showing double-digit earnings growth including industrials, consumer discretionary, and energy.
  • Renewed expectations of a pause by the Fed at the conclusion of its meeting on June 14 do not in our view end prospects for further rate hikes if needed.
  • Economic data released last week continued to reflect resilience in job creation while wage growth figures were constructive.
abstract movement

Given the recent progress on a number of concerning issues that had presented negative overhangs over the markets, traders and investors now will turn to consider what comes next with enough uncertainty remaining on the landscape to keep their attention on a day to day basis.

Q1 earnings season approaches closure this week with just five companies in the index yet to report results. The earnings season has provided enough positive surprises to counter high levels of negative sentiment toward stocks that dominated expectations for results at the start of the earnings season.

With President Biden’s signature on the legislation resolving the debt ceilingcrisis and positively concluding the efforts of negotiation by both sides of the aisle in Congress another major hurdle to economic and market nearterm progress was overcome.

Market action of late suggests that the worst of the regional bank crisis thatgripped the markets from early March has passed without that crisis turning into a systemic debacle provided some sense of relief for bullish and even skeptical market participants while elevating the consternation of the bearish contingency within the markets stateside.

Quotation from Aenean Pretium

Over the course of this week into next we look for the outcome of the Fed’s upcoming FOMC meeting to be among the top considerations for investors and traders.

Along with the passage of the aforementioned traversed hurdles that had gripped investor and trader mind share for much of the year and over the past few months, a burst of enthusiasm for the latest developments in AI (artificial intelligence) has taken at least a few technology stocks markedly higher along with the broad indices in which those leading stocks carry substantial weight or have influence over other index components.

Over the course of this week into next we look for the outcome of the Fed’s upcoming FOMC meeting to be among the top considerations for investors and traders.

The nonfarm payroll number along with other key data for the month of May released last Friday pushed market expectations of a 25bps Fed hike to its benchmark rate at the conclusion of the June FOMC meeting (June 13 and 14) back into question.

While the number of jobs added last month in the nonfarm payroll report surprised substantially to the upside and the unemployment rate rose three tenths (and well above economist expectations), average hourly earnings growth eased a tenth. The offset effect of the latter two items along with comments from Fed officials over the course of last week moved market opinion on the outcome of the next Fed rate decision to allow for the potential of a “pause” in hikes—or as some Fed officials coined the term, a “skip” of a rate hike in June, with the option to raise rates in July should inflation prove to remain sticky in the weeks ahead.

Time will tell soon enough how the Fed will execute its rate decision in June. For now we’d expect every comment made by Fed officials up until the silent period ahead of the June meeting to carry some weight as to how the markets act on a day to day basis.

Over the course of the last few weeks we have seen Fed interest rate futures go from expectations of a pause or even a rate cut to a near certainty of a hike and now to a midpoint of opinion with expectations calling for a pause.

In our view an end of a period of high accommodation in monetary policy that began with the Great Financial Crisis and with the COVID-19 pandemic resulted in a period of “free money” the ending of which remains a key objective for the Fed.

Ten rate hikes by the Fed since March of last year have brought a return to a more traditional interest rate regime in which bond issuers pay for the privilege of borrowing money and bond buyers get something back in terms of stipulated bond coupon rates that can help offset normal risks (such as inflation) that come with bond ownership.

The end of free money also raises the cost of speculative investments, challenges the existence of meme stocks, zombie companies and questionable crypto currencies. As interest rates normalize the creation of bubbles will become more challenged as the cost of money raises the cost of market player aggressive “bets” with the increased cost of margin.

A return to a more normal interest rate regime could likely increase the importance of fundamental factors in investment activity.

We remain constructive on equities and continue to favor cyclicals over defensive sectors, “growthier value” and “garpier growth” stocks.

From a diversified portfolio point of view, interest rates at closer to historically normal levels position total return opportunities attractively in equities from a combination of dividend income along with a potential for capital appreciation as well as a reintroduction of traditional asset class diversification available with improved yields in fixed income securities.

The current environment will likely remain highly transitional in the near term as the US economy moves toward sustainable growth with lower inflation.

In our view diversification, a highly selective process of investing and right sized expectations will remain key for investors to successfully navigate the investment landscape.

John Stoltzfus headshot

John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

Hide Bio


Strategist Certification - The author certifies that this investment strategy report accurately states his/her personal views about the subject securities, which are reflected in the substance of this investment report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this investment strategy report.

The strategy provided in this report is provided by Oppenheimer Asset Management Inc., (“OAM”) a registered investment adviser affiliate of Oppenheimer & Co. Inc. (“OPCO”). It reflects analysis of fundamental, macroeconomic and quantitative data to provide investment analysis with respect to U.S. securities markets. The overview in this report is provided for informational purposes and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security or investment advisory services. The report is not intended to provide personal investment advice. The investments discussed in this report may not be suitable for all investors. Investors should use the analysis provided by this report as one input into formulating an investment opinion and should consult with their Financial Advisor. Additional inputs should include, but are not limited to, the review of other strategy reports generated by OAM, its affiliates, and looking at alternate analyses. Securities and other financial instruments that may be discussed in this report or recommended or sold by OPCO or OAM are not insured by the Federal Deposit Insurance Corporation and are not deposits or obligations of any insured depository institution. Investments involve numerous risks including market risk, counterparty default risk and liquidity risk. Securities and other financial investments at times may be difficult to value or sell. The value of financial instruments may fluctuate, and investors may lose their entire principal investment.

Strategist Certification - The author certifies that this strategy report accurately states his/her personal views about the subject matter reflected in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this strategy report.

Potential Conflicts of Interest: Strategic analysts employed by OAM are compensated from revenues generated by the firm. The strategists authoring this piece also contribute to an OAM managed portfolio product that relies on and trades on the information contained herein. The managed portfolio strategy trades frequently, both ahead of and after the publication of this report. OAM generally prohibits any analyst and any member of his or her household from executing trades in the securities of a company that such analyst covers. Additionally, OAM generally prohibits any analyst from serving as an officer, director or advisory board member of a company that such analyst covers. In addition to 1% (or more) ownership positions in covered companies that are required to be specifically disclosed in this report, OPCO may have a long positon of less than 1% or a short position or deals as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon and makes a market in the securities discussed herein. Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Third Party Research Disclosure OAM has a research sharing agreement with OPCO pursuant to which OPCO provides OAM Strategy thought pieces to its institutional and retail customers. OPCO does not guarantee that the information in OAM Strategy reports is accurate, complete or timely, nor does OPCO make any warranties with regard to the strategy product or the results obtained from its use. OPCO has no control over or input with respect to opinions found in OAM strategy pieces. OAM is a registered investment adviser affiliate of OPCO.

This report is issued and approved by Oppenheimer & Co. Inc., a member of all Principal Exchanges, and SIPC. This report is distributed by Oppenheimer & Co. Inc., for informational purposes only, to its institutional and retail investor clients. This report does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The strategist writing this report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with respect to any security discussed in this report, the recipient should consider whether such investment is appropriate given the recipient's particular investment needs, objectives and financial circumstances. We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice of a financial advisor. Oppenheimer & Co. Inc. will not treat non-client recipients as its clients solely by virtue of their receiving this report. Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they produce may fluctuate and/or be adversely affected by exchange rates, and investors may realize losses on investments in such securities, including the loss of investment principal.

Oppenheimer & Co. Inc. accepts no liability for any loss arising from the use of information contained in this report. All information, opinions and statistical data contained in this report were obtained or derived from public sources believed to be reliable, but Oppenheimer & Co. Inc. does not represent that any such information, opinion or statistical data is accurate or complete and they should not be relied upon as such. All estimates and opinions expressed herein constitute judgments as of the date of this report and are subject to change without notice. Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change, any reference in this report to the impact of taxation. 

Investment Strategy should not be construed as offering tax advice on the tax consequences of investments. As with any investment having potential tax implications, clients should consult with their own independent tax adviser.

This report may provide addresses of, or contain hyperlinks to, Internet web sites. Oppenheimer & Co. Inc. has not reviewed the linked Internet web site of any third party and takes no responsibility for the contents thereof. Each such address or hyperlink is provided solely for the recipient's convenience and information, and the content of linked third party web sites is not in any way incorporated into this document. Recipients who choose to access such third-party web sites or follow such hyperlinks do so at their own risk. The S&P 500 Index is an unmanaged value-weighted index of 500 common stocks that is generally considered representative of the U.S. stock market. The S&P 500 index figures do not reflect any fees, expenses or taxes. This research is distributed in the UK and elsewhere throughout Europe, as third party research by Oppenheimer Europe Ltd, which is authorized and regulated by the Financial Conduct Authority (FCA). This research is for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell investments or related financial instruments. This report is for distribution only to persons who are eligible counterparties or professional clients and is exempt from the general restrictions in section 21 of the Financial Services and Markets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is being distributed in the UK only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) High Net Worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. In particular, this material is not for distribution to, and should not be relied upon by, retail clients, as defined under the rules of the FCA. Neither the FCA’s protection rules nor compensation scheme may be applied. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Oppenheimer & Co. Inc. Copyright © Oppenheimer & Co. Inc. 2023.