Asset Management
06/23/2025 Market Strategy
June 23, 2025
Why Can’t We Be Friends?
Sometimes Things Seem to Get Worse Before They Get Better
Key Takeaways
- We discuss the likely market response to the US attack on Iran and the hostilities between Israel and Iran based on our recollection of past outbreaks.
- Returns on aerospace and defense sector stock funds have outpaced that of the S&P 500 over the past 1, 3, 5, and ten years. We discuss three ETF funds that offer exposure to those segments of the US equity markets.
- Economic data released last week showed a pullback in retail sales after strong gains in recent months and an improvement in the Leading Index.
- This week brings two measures of consumer confidence and the latest revision to the Q1 GDP data.
Market sensitivity to geopolitical tensions can be expected to increase and serve as a negative factor on the global market radar screen near term after the military action taken by the US over the weekend to eliminate the risk of having yet another of the world’s unstable nations gaining access to nuclear warfare capability.
For the equity market in the US and elsewhere it naturally increases the height of the wall of worry that stocks will need to traverse to add further lift to the rally that began from the broad market low on April 8.
History suggests in hindsight that the reactivity, negative outcome projections, criticisms, and proclamations of failure that usually follow a major increase in hostilities can be relatively short in the downside pressure it places on markets as the situation is assessed and cooler heads find opportunity to prevail.
The price of oil has scope for further gains near term if sources of supply come into question should the Strait of Hormuz get shut down.
n the interim purveyors of failure and doom do what they do while cooler heads make efforts to negotiate the situation to a level that can become conducive to a successful resolution.
From our perch on the market radar screen it would seem likely that the nature of the current conflict in the Middle East will require further patience and consideration of historic context and precedence by investors in navigating any volatility that appears on the horizon or is realized by market asset classes.
From an investment perspective some things appear clear to us at this time:
- The price of oil has scope for further gains near term if sources of supply come into question should the Strait of Hormuz get shut down;
- The dollar could get a further boost in its traditional role as a safe haven currency should a real global crisis develop;
- The belief that the era of US exceptionalism was fading could evaporate in trading circles as US assets regain some of investors focus;
- The need for a successful resolution to the US budgetary process and the importance of trade/tariff related negotiations remain key issues at home to be resolved in Washington.
- The arguments of whether current Fed policy is too tight or “about right” remains on the crowded “front burners” of what raises concern among market participants with the economy continuing to show signs of some slowing and the Fed’s inflation target of 2% still elusive.
With the May jobs numbers, Q1 earnings results, and last week’s FOMC rate decision now in the rearview mirror, we expect traders and investors to remain focused near term on developments in the Middle East; news on the budget; any progress in the tariff negotiations, scheduled economic data releases in the days and weeks ahead until Q2 earnings season begins on July 15.
Where We Stand
From our perch on the market radar screen patience and diversification remain key to navigating the markets. Diversification across sectors, market capitalizations, and styles (value vs. growth) with an emphasis on quality in our view can help meet current and future goals and objectives.
Among sectors, we continue to overweight cyclicals over defensive stocks and favor information technology, consumer discretionary, communication services, industrials, and financials. We also maintain some exposure to the energy and materials sectors as demand for these products gains traction as economies show potential to expand globally.
We persist in favoring cyclicals over defensive sectors; maintaining an overweight towards US exposure (we do not foresee an end to US exceptionalism) while maintaining some level of meaningful exposure to both international developed and emerging markets to take advantage of relatively attractive valuations as the world diversifies away from a one country global supply chain to the benefit of a diverse basket of countries well positioned to gain from what appears to us to be a secular shift in trade taking place in the post COVID-19 era.
We consider it important for investors to seek out “babies (quality stocks) that get tossed out with the bath water” in market downdrafts as well as a need to maintain a clear head amid day-to-day uncertainty to avoid “missing the signal for the noise.”
Our intermediate- and longer-term outlook for the US economy and the stock market remains decidedly bullish. We believe US economic fundamentals remain on solid footing. As the drag of tight monetary policy eases, job growth and consumption and business fixed investment demand should continue to exhibit resilience. In addition, should the economy appear to falter, the Federal Reserve has the ability to move swiftly to cut rates further to provide economic stimulus and reinvigorate demand.
We anticipate continued positive corporate earnings growth, a key driver of equity valuations.
In our portfolios and recommended allocations, we continue to favor stocks over bonds with an emphasis on US securities while maintaining meaningful exposure to developed international and emerging-market stocks.
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.
DISCLOSURES
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. 2025.