Asset Management
07/07/2025 Market Strategy
July 07, 2025
Progress Not Perfection
Positive Developments Outweighed the Negatives Last Week
Key Takeaways
- Equity markets in the US and abroad rallied powerfully last week as economic data pointed to resilience.
- US Treasury Secretary Bessent has hinted of three-week extensions past the July 9 deadline for nations that have been making progress on cutting trade deals with the Administration.
- With tariff negotiations coming to a head and earnings season set to start next week, we’re leaving our price target for the S&P 500 unchanged for now.
- The first indicators of economic activity in June pointed to resilience: The nonfarm payrolls survey showed a surprisingly robust gain that knocked a tenth off the jobless rate while the ISM surveys showed improving conditions at both manufacturing and services firms.
- We remain bullish on US equities.
Market action in a holiday-abridged week through last Thursday saw US stocks rally powerfully to outperform their international equity market peers over the week. A confluence of factors supported the rally. These included: some lessening of geopolitical risk in the Middle East; progress in tariff negotiations between the US and several key trading partners; better than expected key US economic data; and the passage by US Congress of the Trump administration’s hard won budget legislation.
The Dow Jones Industrial Average, the S&P 500, the NASDAQ Composite, the S&P 400 (mid-caps), the S&P 600 (small caps), and the Russell 2000 (small caps) respectively advanced 2.3%, 1.72%, 1.62%, 2.85%, 3.24%, and 3.52% through last Thursday’s close ahead of the July 4 holiday weekend.
At the end of the day, it is revenue and earnings growth that determine the direction the markets will take
Bond prices moved lower through the close of the US markets last Thursday with the 10-year Treasury yield rising to 4.36% in part on concerns about the cost of growth to be reflected in the administration’s “Big Beautiful Bill.”
Gold got a bump higher on weakness in the dollar as well as on concerns that the budget legislation enacted could contribute to stickiness in inflation and the US deficit over the course of the next ten years.
Oil got a boost as its price edged higher on prospects for future growth stateside and a lessening on emphasis on alternative energy a hallmark of the prior administration’s energy policy.
When it came to economic data’s support for last week’s rally the focus was in large part on the nonfarm payroll gain that surprised significantly to the upside as 147,000 jobs were added in June---more than a third better than the consensus forecast for a gain of just 110,000. So far, the four most recent nonfarm payroll numbers have exceeded consensus expectations.
Nervousness among market participants that earlier in the week had surged on a large miss in the ADP jobs number turned to positive sentiment furthered by the nonfarm payrolls gain and the unemployment rate which moved modestly lower from 4.2% in May to 4.1% in June.
Budget Bill Comes into Focus
We expect this week to find investors pondering a wide range of arguments pro and against the potential effects of the 1,000 page “Big Beautiful Bill” as well as further developments in negotiations taking place with key US trading partners as the July 9 deadline tied to the recent “pause” of the April 2 tariff regime announcement draws near.
US Treasury Secretary Bessent has hinted of three week extensions past the July 9 deadline for nations that have been making progress on cutting trade deals with the Administration.
With a modest calendar of economic data this week we look for increased interest among investors to the start of Q2 S&P 500 earnings season which gets unofficially underway next week on July 15 when the big US banks begin to report results for the period.
At the end of the day, it is revenue and earnings growth that determine the direction the markets will take.
As to Our S&P 500 Year-End Price Target?
The levels of the tariff regime announced on April 2 which were soon after paused to allow time for negotiations which are now approaching their July 9 end-date.
We’ll stay on hold at 5950 for now for the S&P 500 until we see further confirmation of progress in negotiations with the US’s major trading partners. The levels that ultimately are arrived at and how they are digested by corporations, communities, consumers, and market participants could have varied effects both positive and negative on revenue and earnings growth across sectors, market capitalizations, and style.
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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