Asset Management
07/21/2025 Market Strategy
July 21, 2025
Waiting for Godot (Again)
US Markets Mark Time with the Ultimate Scale and Scope of Tariffs Still Pending
Key Takeaways
- Q2 earnings season kicked off last week. Thus far, just 58 (or 12%) companies of the S&P 500 have reported, but results appear promising.
- Prior to the start of the season, Forbes put expected earnings growth at 4.8% from a year earlier. The 12% of firms that have reported are seeing profits growth of 10.5%.
- This week 110 companies of the S&P 500 are scheduled to report; results of another 169 are due the week of July 28.
- Last week’s consumer price data showed inflation remaining stubbornly above the Fed’s target, with some evidence that tariffs are beginning to lift goods prices. In addition, retail sales surprised to the upside
With not much yet arrived at in terms of where the final tariff regime will resolve to, we find the day-to-day action of US markets looking like we’re at yet another “standing at the crossroads” period in market history awaiting resolution on an issue of significance to provide greater definition as to the next direction asset class prices are likely to take with some consistency.
he market sentiment and the action it delivers from day to day in a given week on one hand can look mighty optimistic -- if not quite celebratory -- on a given day only to become near despondent on the next day.
Just last week, worries that President Trump would try to “fire” Fed Chair Jerome Powell caused a spell of indigestion for the markets across asset classes until the President said he would not likely take such action.
With the “Magnificent Seven” stocks playing a key role in the current market rally, look for results and any guidance from among component companies to be key in influencing the tone and direction of the market over the course of the next few days.
At times like these we find it important to focus on separating the signal from the noise, rightsizing expectations based on the courage of our convictions and practicing patience.
Over the course of the first half of this year we’ve seen market sentiment eschew growth style stocks (especially information technology), revere value nearly as passionately with bears, skeptics, and nervous investors calling for the need to emphasize defensive sectors, and then suddenly a change of view in a reversal of opinion to capitulate bearish outlooks and turn to embrace growth, momentum, and technology once again like a capricious lover homeward bound. p
Earnings Season Underway
The S&P 500 closed higher in three of its five trading sessions last week ending just slightly below its latest all-time high. Earnings results surprised and economic data pointed to better-than-expected retail sales and a drop in jobless claims.
This week offers market participants plenty to ponder with 110 companies in the S&P 500 scheduled to report second quarter results across key sectors that include financials, information technology, and consumer discretionary.
With the “Magnificent Seven” stocks playing a key role in the current market rally, look for results and any guidance from among component companies to be key in influencing the tone and direction of the market over the course of the next few days.
Although it’s way too early to predict the outcome of Q2 earnings season of the S&P 500, it’s worth noting that with just 58 companies having reported thus far some 86% of companies that have reported Q2 results have beaten analyst expectations, according to FactSet data.
Key stateside economic data this week, though light (in the number of data releases scheduled), should provide clues as to the health of manufacturing, services, housing, and unemployment.
With recent economic data showing continued resilience in the US economy across businesses, consumers, and employment -- along with the passage of the budget bill (resolving considerable uncertainty) -- as well as progress by the Fed in keeping the pace of inflation contained, some significant progress in arriving at tariff decisions that are not at draconian levels could serve to remove a negative overhang that’s haunted the market as it traversed the proverbial wall of worry this year.
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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