Asset Management
06/02/2025 Market Strategy
June 02, 2025
There’s Always Something to Worry About
That Said, the S&P 500 Is Less than 4% Below Its Prior Peak
Key Takeaways
- Economic fundamentals were pretty solid in May: the economy showed signs of resilience and inflation continued to moderate.
- With 98% of the firms in the S&P 500 index having reported, first quarter results are tracking higher than expected. Profits in Q1 are up 12.5% from a year earlier on 4.6% revenue growth. Prior to the start of the quarter, Bloomberg’s bottom-up estimates put analysts’ expected earnings growth at 6.8% from a year earlier.
- Seven sectors are reporting positive earnings growth, with four at double-digits, while four sectors show negative growth, two of which show double-digit negative growth.
- The Q1 earnings reporting season is winding down: this week just eight firms report and the final two are due by June 20.
The new month enters with a brace of economic data that culminates with the May jobs number and unemployment rate on Friday. Data scheduled for release this week includes an array of key stateside data tied to manufacturing, services, job openings, housing, unemployment, Fed regional anecdotal data, productivity and the Labor Department’s monthly jobs numbers for the month of May on Friday.
May turned out to be a month in which positive factors handily offset any number of negative challenges on a day-to-day, week-to-week basis causing by month-end some consternation among bears and market skeptics.
With Q1 earnings season moving into the rear-view mirror, increased investor focus will likely turn to any and all progress in the tariff negotiations as well as to the US budget process.
The Fundamentals Look Good
Economic data persisted resilient last month even as some economic slowing was seen as a result of tariff risks that persist as a negative overhang not only to stocks but also to some other asset classes.
The US lost its AAA debt rating in May jostling the bond market while traders sorted out what the implications would be for US debt issuance. The reactive actions from traders and subsequent roil in the bond market eased some as traders considered two prior downgrades of US debt (in 2011 and 2023) by two other rating agencies and the respective effects of those prior downgrades on the US economy and demand for US debt.
Inflation moved lower on a number of metrics illustrated among data released last week that included one of the Fed’s favorite gauges of inflation.
Consumer sentiment unexpectedly perked up some based on data from the Conference Board and University of Michigan surveys.
First quarter S&P 500 earnings season continued to deliver results which surprised to the upside with the month-end showing Q1 season’s results with 491 of 501 companies reported showing earnings growth for the S&P 500 up 12.5% on back of 4.6% revenue growth as of last Friday.
With just ten companies left to report results, seven sectors are showing positive Q1 year-over-year earnings growth with four of those having double-digit earnings growth (health care 43.9%, communications services 30.6%, information technology 18.6%, and utilities 14.4%). Four sectors of the S&P 500’s 11 sectors have shown negative earnings growth with two at double-digit rates of decline (materials -14.4% and energy -13%).
With Q1 earnings season moving into the rear-view mirror, increased investor focus will likely turn to any and all progress in the tariff negotiations as well as to the US budget process.
We remain positive on equities from both a US and global perspective. In our view, investors should expect that near-term market performance while continuing to show high sensitivity to news and market sentiment du jour ---along with varied levels of subsequent volatility--- will over the intermediate and longer term reward patience and prudent diversification as economic growth persists at a sustainable pace and the issues of the day are overcome as cooler heads prevail.
With the US equity markets lagging many of their international peers this year many investors are looking abroad for opportunities tied to valuations in both developed international and emerging equity markets which had significantly lagged the US markets in performance for most of the last decade.
Global diversification of assets has always been a part of our approach and consideration to portfolio construction. That said, we remain overweight US equities and do not ascribe to the view that US exceptionalism is fading. We expect the process of innovation that remains embedded in US technology and across all the other ten sectors to keep the US markets in the winners’ circle into the distant future.
We persist in believing that the end of globalization is not imminent but rather that an even broader globalization likely lies ahead as business and consumers diversify away from a one country centric global supply chain and drive diversification of the global supply chain across the regions of the world. We look for innovation to drive higher levels of efficiencies and competition across the globe benefiting developed, emerging, and frontier markets.
We remind our readers that change is frequently considered and desired by many but when it arrives on the scene it is seldom easy to adapt to and embrace.
The effects of the stock market rally from the lows seen on April 8 through last Friday appear to us to continue to augur positively for investors practicing diversification and patience notwithstanding near-term uncertainties.
Name:
John Stoltzfus
Title: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.
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