Asset Management
06/30/2025 Market Strategy
June 30, 2025
The Long Hard Road
The Bull Market Recovery Has Been Impressive But We’re Leaving our Price Target Unchanged For Now
Key Takeaways
- We update our maximum drawdowns page this week to show that this year’s 18.9% drawdown in the S&P 500 lasted 80 days before its prior peak, reached on Feb. 19, was exceeded last Friday.
- Growth style stocks are leading value stocks again across all market cap segments.
- Economic data released last week showed mixed results between the two major consumer confidence measures but with inflation expectations moderating in both surveys. The PCE deflator data showed tame monthly readings but an uptick in the 12-month inflation rates.
- This week brings the first indications of economic activity for June with the nonfarm payrolls data and ISM indexes due before Friday’s Independence Day holiday.
Last Friday the S&P 500 closed at a new record high of 6173. Put in context that’s 4.96% above where it started this year (5881.63), up 23.9% above its April 8th low (4982) and just 0.47% above its February 19 prior record high. Despite this, we’re leaving our price target unchanged.
To review, last December 9 we initiated a 2025 year-end target of 7100 for the S&P 500 expecting about 17% upside this year from that point to the end of this year. Our earnings projection for the S&P500 was $275 at that time.
Market sentiment early on this year soured first on concerns tied to risks for economic growth, geopolitical risks and valuations of some segments of the market. By early April market participants had begun to discount a potential for an extraordinarily high tariff regime after the Trump administration announced its pre-negotiation tariff schedule on April 2.
…For now we will wait to see where levels of tariffs are actually set before we consider revising our target higher.
We’re Still Bullish
The announcement led us to reduce our year-end target on April 7 to 5950 and cut our S&P 500 earnings projection to $265 (or by around 3.6%). Those new target and earnings projections remained bullish with prospects of around 17% upside (from its April 4 level) for the S&P 500 on what we expected would likely be a market recovery after results of negotiations between the US and other nations took place. We expect to see cooler heads prevail and the proposed tariff rates of April 2 that rattled market sentiment will come down substantially in the process of negotiations.
Now at the midyear point, the market appears of late to be discounting a workable regime of tariffs to be arrived at in the near future or at very least enough “workarounds” to be found by companies affected to make the effects of tariffs on trade with key partners and key products substantially less onerous.
While we remain bullish on equities based on stateside economic fundamentals, monetary policy, earnings results for the S&P 500 in recent quarters reported, watershed caliber technological innovation (both cyclical and secular) and we recognize that tariff negotiations of such magnitude and scope as those proposed and undertaken require considerable time and effort to conclude, for now we will wait to see where levels of tariffs are actually set before we consider revising our target higher.
We think it best to ponder the context of where the market closed last Friday in consideration of the fact that the level of the latest record closing price of the S&P 500 (6173) was just 3.75% above the 5950 target we put in place April 7.
Q2 Earnings Two Weeks Away
With the S&P 500 earnings season to get underway unofficially just a little over two weeks from now when the big banks begin to report on July 15, we’ll look for investors to home in on this week’s US key economic data, which includes updates on manufacturing, construction, job openings, regional Fed business activity, vehicle sales, the ADP employment change on Wednesday followed by the June nonfarm payroll report on Thursday ahead of the US Independence Day Holiday on Friday, July 4.
We wish our US readers a happy and safe Independence Day!
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 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.
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