![Oppenheimer logo banner header](/_assets/images/images/oppenheimer-banner.jpg)
04/08/2024 Market Strategy
When Good News Disappoints
Last week’s resilient economic data led those hoping for a Fed pivot in June to reassess
Key Takeaways
- Q1 earnings season unofficially kicks off on Friday when several large banks report results. Bloomberg published bottom-up estimates for earnings growth at 3.9% from a year earlier. If realized, this would be a slowing in growth from the nearly 8% pace of Q4.
- The price of gold reached new record highs last week as some central banks purchased the metal to shore up their currencies and as some expect a decline in the US dollar on a Fed pivot to lower rates.
- Last week’s jobs report surprised to the upside with a 303,000 gain in payrolls and a decline in the jobless rate. The ISM reports also showed strength as manufacturing activity moved the index into expansionary territory.
- This week brings the consumer price index data for March, the first readings on inflation for last month. Consensus estimates are for 0.3% monthly gains in both the headline and core indexes.
![abstract financials](/_assets/images/images/news-and-media/2024/april/articleimage_0408.jpg)
Last week saw resilience in economic data tied to the jobs market as well as stickier than expected inflation cause a jump in volatility that sent stock and bond prices lower.
Oil prices advanced after the US Energy Information Administration forecast global inventories would fall by some 900,000 barrels a day raising concerns among traders that rising demand could push prices higher. A confluence of factors including OPEC and its partners’ plans to reduce production, Mexico’s move to cut its crude exports, increased geopolitical tensions, and rising demand as economic conditions improve have contributed to a steepening of the proverbial “wall of worry” for markets to climb at least for the near term.
A Mixed Bag of Factors Power Gold Rally
The price of gold hit new record highs last week (see graph nearby). Purchases of the precious metal by central banks of emerging market nations looking to shore up their currencies, as well as investors seeking to use gold as a hedge against a strong dollar along with hedging against prospects that the dollar could fall when the Fed gets closer to cutting rates have all contributed to gold’s rally this year.
From a perspective of anecdotal evidence we can’t help but think that the age old market adage that “the only cure for higher prices is higher prices” may well apply to gold this cycle.
We recall that in past cycles the longer and higher that gold’s price rises the more that ads for buying gold tend to appear on television and in publications. Next often follows a surge in silver prices as the metal that usually lags gold garners investors’ and traders’ attention as a “catch up” trade. The longer that gold and silver rally the more likely that stocks in miners of these metals find tail wind.
For now we remain positive on stocks and suggest that investors seek out “babies that get tossed out with the bathwater” in stock market pull backs. The recent rise in bond yields and commensurate ebbing of bond prices suggests to us that fixed income remains complimentary to stocks for investors seeking income and portfolio diversification.
Inflation Data and Bank Earnings on Tap this Week
In the week ahead investors will likely look to the minutes of the Fed’s March FOMC meeting, the CPI, the PPI, along with data on real hourly and weekly earnings for guidance of the direction markets are likely to move.
In our view for all the success the Fed has had over the course of the last two years in curbing the pace of inflation a “last hurrah” for price pressures still eludes the Federal Reserve while some market participants still wait for rate cuts sooner than the Fed is likely to opt for. We have found that patience is indeed a necessary virtue for investors to practice particularly when the Fed is dealing with sticky inflation.
Investors will soon begin to look forward to Q1 earnings season which unofficially gets underway this Friday when the big banks begin reporting their results.
Bottom-up estimates from Bloomberg put projected earnings growth at 3.9% in Q1 from a year earlier, which would mark a slowing in growth after the nearly 8% growth rate of Q4.
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. 2024.