In a recent analysis, Oppenheimer Asset Management has highlighted how the latest quarterly financial results of S&P 500 companies are effectively counteracting bearish sentiments regarding potential earnings recession. According to their report on Monday, as many as 455 companies representing the benchmark equity index have reported their financial results, revealing a more favorable performance trend than anticipated. Oppenheimer Asset Management Chief Investment Strategist, John Stoltzfus, noted that nearly 79% of these firms have surpassed analysts’ expectations.
He stated in his communication to clients, "The prior two earnings season results, like the current one, surprised to the upside with positive earnings growth countering bearish predictions of an earnings recession." Analyzing the current earnings season, Stoltzfus remarked that S&P 500 companies have demonstrated an impressive earnings growth of 9.3% from the previous year, fueled by a revenue increase of 5%.
Notably, eight out of the eleven sectors have recorded positive bottom-line growth, with five sectors achieving remarkable double-digit percentage increases. The consumer discretionary sector led the charge with a 19% rise, while materials faced a dip of 7.4%. Excluding the materials and consumer staples sectors, all other sectors reported an annual uptick in quarterly sales, with energy seeing a notable 7.9% ascent, as indicated in the report. As we approach the end of the earnings season, only nine companies are scheduled to disclose their results this week, including retail powerhouses Walmart ($WMT) and Home Depot ($HD).
Additionally, fourteen other companies are set to report their financial outcomes next week. In a related note, government data expected to be released on Wednesday is likely to show a 0.2% increase in US consumer inflation sequentially and a 3% rise year-over-year for July, according to a consensus compiled by Bloomberg.
Furthermore, the official report on producer prices for the previous month is slated for release on Tuesday. The forthcoming earnings announcements, coupled with macroeconomic data, are anticipated to provide clearer insights concerning the extent and timing of possible monetary policy easing by the Federal Reserve, as highlighted by Oppenheimer. In terms of market predictions, Oppenheimer noted that the futures market is factoring in a high probability for a 25-basis-point interest rate cut by the Federal Open Market Committee during their next meeting.
Stoltzfus commented, "This has been accompanied by an improvement in market sentiment towards equities, helping the S&P 500 regain some ground lost since its recent all-time high on July 16." As of Friday, the benchmark equity index was noted to be down 5.7% from its mid-July peak. Stoltzfus asserted, "We continue to maintain an overweight position in US equities while also holding substantial exposure to both international developed and emerging markets.
This strategy is aligned with the US central bank’s shift towards easier monetary policies, confirming that measures to curb unwanted inflation are being effectively implemented or are nearing completion." He added that market volatility should be anticipated as both the economy and markets adapt to transitions in economic and monetary policies, moving towards greater normalization..