Asset Management
05/27/2025 Market Strategy
May 27, 2025
As the World Turns
Globalization Is Likely to Increase Rather Than Wither Under the New Trade Agreements Being Negotiated
Key Takeaways
- An extension of trade talks between the US and EU contributed to positive sentiment in Asian trading coming into the opening in New York on Tuesday morning at the start of a holiday-abridged week.
- With 95.4% of the firms in the S&P 500 index having reported, first quarter results are tracking higher than expected. Profits in Q1 are up 11.3% from a year earlier on 4.2% revenue growth. Prior to the start of the quarter, Bloomberg’s bottom-up estimates put analysts’ expected earnings growth at 6.8% from a year earlier.
- Seven sectors are reporting positive earnings growth, with four at double-digits, while four sectors show negative growth, two of which show double-digit negative growth.
- The Q1 earnings reporting season is winding down: this week just 13 firms are scheduled to report, followed by 8 over the week of June 2.
News over the Memorial Day holiday weekend that the European Union had agreed to accelerate the pace of trade negotiations currently underway with the US eased some concerns that had begun to roil markets last week.
Bloomberg news reported yesterday that a phone call between EU President Ursula von der Leyen and President Donald Trump had resulted in the US president extending a deadline to July 9 that could have earlier imposed 50% tariffs on the European Union. The news contributed to equity market rallies in Asia and Europe on Monday that extended overnight into the futures market ahead of exchange openings in Asia, Europe, and the US earlier today.
We remain overweight US equities and do not ascribe to the view that US exceptionalism is fading.
Issues tied to what the Trump Administration seeks to gain from the trade negotiations along with the EU’s recent actions towards a number of major US companies that have led to lawsuits and increased regulation towards US firms have apparently dogged the negotiation process to date.
As US traders and investors return to the markets stateside in a holiday-abridged week, the aforementioned trade negotiations, a ramp up in geopolitical tensions, a brace of key US economic data (ranging from durable goods orders to home prices, manufacturing and services activity, GDP growth, inflation data and consumer spending along with key inflation data and May’s FOMC meeting minutes) should provide plenty to ponder.
With the S&P 500 Q1 earnings season coming to a close, market participants will be focused on a number of widely followed companies belonging to the consumer discretionary, information technology and energy sectors scheduled to report results.
With the US equity markets having lagged many of their international peers this year many investors are looking abroad for opportunities tied to valuations in the developed and emerging equity markets, which had significantly lagged the US in performance for much of the last decade.
Global diversification of assets has always been a part of our approach and consideration in portfolio construction. That said we remain overweight US equities and do not ascribe to the view that US exceptionalism is fading. If anything, we expect the process of innovation that remains embedded in US technology and across the other ten sectors to keep the US markets in the winners’ circle into the distant future.
We do not believe that the end of globalization is upon us but rather that an even broader globalization likely lies ahead diversified away from a one-country-centric supply chain and driving higher levels of efficiencies and competition across the globe.
Change is often considered and desired by many, but in our experience is seldom easy for most to adapt to and embrace.
The effects of the stock market rally from the lows seen on April 8 through last Friday appear to us to augur positively for investors practicing diversification and patience notwithstanding near-term uncertainties.
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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