02/10/2025 Market Strategy
Embrace the Uncertainty
In Meeting with Investors Last Week, The Questions Remained Familiar
Key Takeaways
- With 62% of the firms in the S&P 500 index having reported, results look promising for the Q4 season with earnings reported so far rising 12.6% from a year earlier on 5.4% revenue growth. Bloomberg put analysts’ expected earnings growth at 7.3% from a year earlier.
- Among the sectors, eight are seeing earnings growth, with five at double-digit rates. Three sectors are seeing earnings declines, with two at double-digit rates.
- This week, another 78 firms are due to report, and another 44 firms are scheduled for the week after. About 77% of firms that have reported have beaten analyst estimates.
- Last week’s nonfarm payroll survey job gains fell short of expectations but was resilient in other ways. The ISM surveys also pointed to expanding conditions in both manufacturing and services.
- This week brings data on prices in January with the CPI and PPI reports both due mid-week as well as January retail sales.
In our view, markets continue to reflect the persistent resilience in the US economy which has confounded bears and skeptics for years now even while being to some degree offset by concerns among market participants about Fed monetary policy and a broad range of policy changes by the Trump administration as it addresses a need to secure the US borders and reduce the cost of government (which persists in exceeding revenues generated from taxes which many of the electorate—and not just the rich—regard as already onerous).
Overlay the aforementioned issues with the perennial subjects of chief concern to the markets of interest rates, revenues and earnings, and it's no wonder the stock market and the bond market have a proclivity since the start of the year to bounce between gains and losses as traders position and re-position while investors rotate and rebalance across sectors, market capitalizations and style in the stock market and bonds and other fixed income instruments price and reprice in response to trader and investor shifts in sentiment.
Enough is Enough
For all the drama that projected and actual changes in the direction of monetary policy, economic growth and fiscal policy can generate in the stock and bond markets ultimately all that matters to the markets is revenue and earnings growth and a level of sustainable economic growth at a pace that does not reach untoward levels of inflation nor raises unemployment to a level that induces economic recession.
From our perspective on the radar screen enough good things are happening to offset the negatives and the "what if?” worry that never goes away.
Change is always a challenge
In our view both the economic data as well as the direction of both the bond and the stock markets (along with the price of oil and the price of gold) appear to be doing what one might well expect given the transitions that are taking place in government, monetary policy, technology, and in commerce (business and the consumer).
While a gauge of the services sector showed some slowing (after having remained quite robust for years), a gauge of US manufacturing has picked up after a long period of weakness. Based on the latest ISM readings both the services and manufacturing sectors are now reflecting expansion. Not too shabby in our view.
Revenue and earnings growth for the S&P 500 —with over 60% of its companies having reported in the Q4 earnings season through last Friday are exceeding expectations—with earnings growth up over 12% in the period on the back of 5% revenue growth.
Eight sectors are showing positive earnings expansion with five of those sectors posting double digit earnings growth compared to a year earlier. The five sectors posting double digit earnings growth are: consumer discretionary (36.8%), communications services (28.3%), health care (22.2%), financials (19.3%), and information technology (11.7%).
The three sectors posting negative earnings growth are: energy (-33.6%), materials (-10.2%) and industrials (-6.4%).
With key US economic data and S&P 500 corporate earnings growth exceeding expectations and with the Fed likely to maintain the sensitivity it has shown in practicing its dual mandate we'll maintain our favorable outlook for 2025.
We continue to favor equities for potential total return with fixed income as a complimentary asset class for current income and portfolio diversification.
Diversification across sectors, market capitalizations and style in our view remains important for investors to consider as a transition toward sustainable growth at modest levels of inflation with a normalization of interest rates remains on course.
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.