Skip to Main

09/05/2023 Market Strategy

  • John Stoltzfus
  • September 5, 2023

The Economy and Markets Remain in Work-Out Mode

Resilience remains the operative word even as uncertainty persists

Key Takeaways

  • With 99% (496 of 499) of the companies of the S&P 500 having reported Q2 earnings, the results now appear in-line with expectations from early July.
  • Earnings are off 5.8% from a year earlier, a bit better than the -6.4% contraction expected at the start of the season. Revenue growth has been minimal (up just 1%).
  • Eight of the 11 S&P 500 sectors reported positive earnings growth in Q2.
  • Last week’s first glance at economic data for August showed resilience in the employment outlook but continued stickiness in the Fed’s preferred inflation measure. The ISM manufacturing survey showed a small improvement but remains in “contractionary” conditions. 
financials abstract

This Labor Day holiday-abridged week will provide market participants and pundits additional economic data points to consider as to the direction the markets will likely take as S&P 500 Q2 earnings season nears a close and the last month of the third quarter gets underway.

A glance under the hood of S&P 500 Q2 earnings season suggests resilience. While the aggregate decline in earnings growth was close to expectations ahead of the start of the season, the drop in earnings growth was centered in three sectors (energy, materials and health), which each experienced double digit declines in the period. The other eight sectors of the S&P 500 posted positive earnings growth.

Quotation from Aenean Pretium

With the VIX near a 12-month low we wouldn’t be surprised to see at least some choppiness in the near term develop to keep investors on their toes.

September has arrived

Seasonal consideration of September’s reputation as a historically tough month for stocks could see a pickup in volatility should a catalyst appear on the horizon that’s worthy of providing bears and skeptics a chance to take some profits without FOMO (fear of missing out).

And with the VIX near its 12-month low (at a level of 13.2 as of last Friday) we wouldn’t be surprised to see at least some choppiness in the near term develop to keep investors on their toes.

Based on the resilience reflected in recent economic data including that related to jobs, the consumer, business—and the degree of success the Fed has had thus far this Fed fund’s hike cycle—we’d look for turbulence that might develop near term in the equity market as potential opportunity for investors to seek out the proverbial “babies” that can get “tossed out with the bathwater” in market downdrafts.

A big tranche of economic data released last week in our view added to the case for the potential of more strengthening in the economic outlook—if at a moderate pace—as the Federal Reserve remains vigilant against inflation.

Among the developments that in our view point to a continuation of improvements likely still ahead we’d include:

  • Resilient employment growth that underscores that things are getting better even as levels of uncertainty clearly remain on the landscape.
  • The ability of consumers and businesses to navigate the current Fed Funds’ hike cycle (and relatively high interest rates) remains supportive of the equity market in our view;
  • Labor force participation, and hourly wage gains suggest the economy remains resilient even as it slows as the Fed stays vigilant on inflation;
  • The Fed’s continued sensitivity to the effects on the economy of its actions to curb inflation;
  • In our view this sensitivity reduces the likelihood of the economy experiencing a hard landing
Meanwhile Stay the Course

While inflation remains higher than the Fed’s target, progress made thus far in getting inflation to fall in the direction of its 2% goal suggests to us that investors need to stay the course, exercise prudent diversification, practice patience, and right-size expectations.

Our favorite sectors remain information technology, consumer discretionary and industrials.

We look for the energy sector to garner increasing interest from investors as prospects for sustainable economic expansion in the US become more evident. The “end of free money” in our view is a good thing as bond issuers pay for the privilege of borrowing money and fixed income investors find coupons that offer some return that encourages asset class portfolio diversification.

While much was made by a brace of bears and skeptics of the weakness experienced by stocks in the process of the markets navigating a course through the month of August it should also be noted that the S&P 500 and the Nasdaq Composite ended the month off respectively 1.77% and 2.17%. The same indices on a year to date basis are up respectively 17.61% and 34.06% suggesting to us that near-term weakness could prove further down the road in hindsight to be the pause that refreshes.

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.