“
”Markets in Focus
Timely analysis of market moves and sectors of opportunity
U.S. equities remain resilient despite global skepticism and political noise, supported by strong economic data and earnings.
The case for global diversification is supported by rising prospects for growth in areas such as Europe and India and the added tailwind of a falling dollar.
Durable secular growth trends, especially in artificial intelligence, and recent gains in small-cap stocks continue to support growing breadth in the U.S. equity market.
Global equities as represented by the MSCI ACWI (All-Country World Index) continue to scale the wall of worry, hitting a new all-time high to close last week.1
Meanwhile, predictions of a downturn in U.S. equities look overstated based on strong capital inflows and resilient economic indicators, said Matt Orton, CFA, Chief Market Strategist at Raymond James Investment Management. The idea that hard economic data would have to decline to match the more pessimistic soft data always seemed like a tall tale that bearish investors have tried to keep alive.
Additionally, Orton believes the high-profile breakup between President Trump and Elon Musk could help to keep the president focused more on a path forward for proposed domestic legislation than on tariffs.
“I see negative sentiment and portfolio positioning that is out of step with larger economic trends as setting up potential tailwinds to help this rally continue,” he said.
After spending the past week abroad talking to global investors, many based outside of the United States, Orton said he was a little surprised by the level of pessimism toward the U.S. market. Nearly everyone he met was caught off-guard by the speed of the recovery, and now they are starting to feel a need to buy even the shallowest of dips.
Orton suspects this may be the case for many domestic investors as well. While many U.S. mega-cap companies have rebounded strongly, he noted that there also has been improving breadth, which is critical to sustaining a bull market. Smaller companies, which he sees as a better signal for the macro economy than large caps, likewise are starting to improve. International developed and emerging markets also continue to do well, highlighting that it was never accurate to look at the U.S. versus everything else as a zero-sum game.
“While I remain optimistic and continue to advocate for thinking about building better balance in portfolios, I would continue to avoid chasing rallies and to wait for pullbacks to consider deploying new capital,” he said.
The merits of staying invested: Global equities are back at all-time highs despite the pessimism
MSCI ACWI (All-Country World Index) since 2021
Source: Bloomberg, as of 6/6/25.
The debate around the end of U.S. exceptionalism is very nuanced, and Orton thinks it’s too soon to come to any conclusions. Some key drivers of U.S. exceptionalism appear to remain firmly in place, he said. These include innovation in artificial intelligence (AI) as well as a dynamic and resilient corporate sector. Inflows to U.S. stocks have also continued, even since President Trump’s “Liberation Day” tariff announcement on April 2. U.S. inflows are on a pace to reach $138 billion for all of 2025, which would be the second-largest annual inflow ever. While global capital might not be leaving, investors have noticed that current U.S. policies have forced other countries to make some positive changes to their own fiscal policies. The MSCI EAFE (Europe, Australasia, and the Far East) Net Index is up nearly 20% year to date (YTD) and is 5.7% above its pre-Liberation Day highs while the S&P 500 Index is up only 2.6% YTD and is still down 2.3% from its all-time high. So, rather than selling from the U.S., it appears that the marginal investment dollar is more likely to go to Europe: data since Liberation Day shows inflows to European equities of 1.1% of assets under management (AUM) versus 0.1% of AUM for U.S. equities. That said, scale differences between the two regions are huge, with U.S. equity AUM at $12.5 trillion versus European AUM at $1.8 trillion. This is a key reason why Orton said he remains optimistic about the potential diversification opportunities offered by having a global allocation in portfolios.
Last week marked the two-month anniversary of Liberation Day. While the event itself felt like a cataclysm, Orton noted that both U.S. markets and U.S. economic data have since held up much better than many investors expected. The 10-year U.S. Treasury yield is up 30 basis points (bps) since Liberation Day and the 2-year yield is up 15 bps, while the S&P 500 has gained about 5.5% following a strong first-quarter earnings season and hard economic data that has been fairly robust.
There has also been a lot of concern about the fiscal impact of the proposed One Big Beautiful Bill Act, along with the bill’s potential to fuel an increase in real interest rates that eventually would be expected to feed into the economy and equity market.
“I increasingly believe that further moves in real yields could lead to weaker growth or Treasury market instability that would eventually draw policy support from the U.S. Federal Reserve and/or the Treasury,” Orton said. “Additionally, we cannot ignore the potential positive growth impact from the proposed bill that could provide further stimulus to the equity market.”
With few economic reports due this week and the Fed in a blackout period ahead of next week’s June meeting of the Federal Open Market Committee, Orton believes the likely path of the stock market remains higher — especially if it’s a quiet week from the White House on Truth Social. Earnings over the past few weeks have been broadly positive, particularly for companies with significant exposure to durable secular growth themes like artificial intelligence. Cyclicals, especially semiconductor companies, are seeing rising share prices that don’t reflect the bear narrative that the U.S. economy is heading toward a meaningful slowdown. Additionally, small caps are showing some signs of life. Sentiment remains depressed, but it has reversed from apocalyptic levels just two months ago. Accordingly, areas that Orton is watching include:
Potential global diversification opportunities. The case for global equities to continue performing well remains in place, Orton said. Developed international markets could continue to find strength from Europe, particularly from the fundamental improvement across banks as well as the potential secular growth opportunity in defense. Orton believes that European defense represents an interesting long-term growth opportunity as NATO budgets rise and the need for next-generation military solutions is expected to lead to a meaningful ramp up in spending. Meanwhile, emerging markets have also benefitted from a weaker U.S. dollar as well as from meaningful growth tailwinds in specific markets. Orton met with management teams from some of the largest Indian companies last week, and he said he left even more excited about the long-term prospects for growth in the world’s fourth-largest economy. He sees India as a long-term growth market in which he believes global indices remain underinvested.
Long-term secular growth trends. Orton sees the current environment — as characterized by strong underlying fundamentals and whipsawing headlines and market narratives — as highly favorable for considering investments in durable growth trends. Focusing on growth durability appears to have been more productive than dwelling on noise and extreme narratives so far this year, and Orton expects that to continue going forward. One of the most durable drivers of growth right now is AI, as the hyperscalers have all posted strong earnings and guidance and reaffirmed their capital expenditure budgets for the rest of 2025. This has enabled companies poised to be secondary beneficiaries of AI to surge higher, providing a ballast to some of the most cyclical parts of portfolios that have been wrapped up in noise around headlines.
Smaller companies. The AI trade has been the backbone of the large-cap market, and continued bearishness with respect to the economy led earlier this year to some very challenging performance down the market-cap spectrum. But Orton noted that the Russell 2000® Index is up more than 21% from its April lows and is above pre-Liberation Day levels. For investors looking for ways to both diversify portfolios and lean into risk, Orton believes smaller companies could fit the bill. Valuations relative to large caps remain historically attractive and interest rates, while elevated, don’t pose an existential threat to the businesses of smaller companies. In fact, he noted that half of the Russell 2000’s debt is held by just over 100 of its companies, most of which are concentrated in communications services, utilities, and industrials. Over a third of the index is net cash positive, undercutting the prevailing narrative that variable rate debt poses a crushing burden to small caps. This is an area where Orton would argue that stocks appear to have bottomed. The balance of risk and reward suggests considering whether to slowly wade into small caps, he said.
With the Fed in its blackout period, inflation data across the United States, China, and the U.K. will be in the spotlight. The U.S. Consumer Price Index is expected to show deflation in services even as tariffs add inflationary pressure for goods.
U.S. Treasury auctions, including for 10- and 30-year bonds, will serve as another test of demand for duration.
1 Unless otherwise indicated, all data cited is sourced from Bloomberg as of June 6, 2025.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Link(s) are being provided for informational purposes only. Raymond James Investment Management is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James Investment Management is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Investing in bonds involves risks that may adversely affect the value of your investment such as inflation risk, credit risk, call risk, interest rate risk, and liquidity risk, among others. The two most prominent factors are interest rate movements and the credit worthiness of the bond issuer. Investors should pay careful attention to the types of fixed income securities that comprise their portfolios and remember that, as with all investments, there is the risk of loss of capital.
Definitions
American exceptionalism, also known as U.S. exceptionalism, is an idea centered on the notion that the United States is a unique and even superior nation as a result of historical, ideological, religious, and/or, in the context of finance, economic reasons. Proponents of American exceptionalism often expect or advocate for the United States to occupy or play a leading role in global affairs.
Ballast, in finance, can refer to characteristics, factors or trading strategies that mitigate volatility or provide stability to a security or group of securities. The phrase, “the benchmark is not the ballast,” refers to risk of believing that the universe of securities within a single index provide the level of stability that investors might seek from subgroups of securities within the index.
Basis points (bps) are measurements used in discussions of interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%.
Breadth describes the relationship between the median and the mean of a market index. When a few data outliers result in a mean that is substantially larger (or smaller) than the median of the full data set, then the performance of the entire index is being driven by a “narrow” selection of companies. An index supported by “broad” market movements is one where the median is closer to the mean. Market breadth is said to narrow when a smaller number of more extreme outliers drive the mean of an index further from its median.
Capital expenditures, or capex, are monies used by a company to buy, improve, or maintain physical assets such as real estate, facilities, technology, or equipment, and may include new projects or investments.
The U.S. Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The U.S. Bureau of Labor Statistics bases the index on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 6,000 households and 22,000 retailers.
Cyclical stocks have prices influenced by macroeconomic changes in the economy and are known for following the economy as it cycles through expansion, peak, recession, and recovery.
Duration incorporates a bond’s yield, coupon, final maturity, and call features into one number, expressed in years, that indicates how price-sensitive a bond or portfolio is to changes in interest rates. Bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.
Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.
The Federal Open Market Committee (FOMC) consists of 12 members: the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis. The FOMC holds eight regularly scheduled meetings per year at which it reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth. The FOMC observes a blackout period, which begins at midnight of the second Saturday before each meeting. During the blackout periods, committee members do not make public comments about macroeconomic developments or monetary policy issues.
Fund flow is the net of all cash inflows and outflows into and out of a particular financial asset, sector, or index. It typically is measured on a quarterly or monthly basis. Investors and others look at the direction of fund flows for indications about the health of specific securities and sectors or the overall market.
Guidance refers to statements from the managers of publicly traded companies that indicate whether they expect to realize near-term profits or losses and why.
Hard data in economics refers to objective, quantifiable measurements of economic activity. Hard data is backward-looking and takes time and effort to collect and verify.
Hyperscalers refers to the largest cloud computing providers that can provide massive amounts of computing resources and storage at enterprise scale.
Investment-grade refers to fixed-income securities rated BBB or better by Standard & Poor’s or Baa or better by Moody’s.
Liberation Day is a term used by President Donald Trump to refer to April 2, 2025, when he announced a wide range of unexpectedly high tariffs on many U.S. trading partners, triggering a global selloff of risk assets.
A marginal dollar of investment refers to a dollar of investment that could have lower returns than earlier investments made by an investor.
Market capitalization, or market cap, refers to the total dollar market value of a company’s outstanding shares of stock.
Mega-cap stocks are the largest publicly traded companies as measured by market capitalization. Generally, this refers to companies with market capitalizations over $200 billion.
NATO, or the North Atlantic Treaty Organization, is a political and military alliance of 32 countries from Europe and North America that is organized to guarantee their security and cooperation.
Net cash flow is measured by subtracting total cash outflows from total cash inflows. A positive net cash flow indicates that inflows exceed outflows, a sign of health for the company being considered.
The One, Big, Beautiful Bill Act refers to a proposed congressional bill that would raise the U.S. debt ceiling by $4 trillion, as well as make permanent tax cuts created by the Tax Cuts and Jobs Act of 2017, change a wide range of other aspects of federal tax policy, eliminate taxes on tips, overtime, car loan interest, make changes to health insurance legislation, phase out or reduce credits for clean energy production or use, and remove tax benefits for illegal immigrants, among other things.
Positioning refers to assessments of whether professional investors are, on the whole, bullish or bearish on a particular security, industry, sector, market capitalization or other area of the market, as reflected by the extent to which they are invested in the area of the market in question.
A pullback is a temporary pause or drop in the price of a security that previously had been rising.
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation. Once adjusted, it reflects the real cost of funds to a borrower and the real yield to a lender or to an investor. A real interest rate reflects the rate of time preference for current goods over future goods. For an investment, a real interest rate is calculated as the difference between the nominal interest rate, which is not adjusted for inflation, and the inflation rate.
Secular trends are large-scale and ongoing changes in economies and societies that have the potential to drive broad and lasting economic, technological, social or other kinds of changes.
Soft data reflects the results of surveys of consumers or other participants in the economy, as well as indices focused on sentiment and expectations. Soft data tends to be forward-looking, providing indications about the direction of existing trends.
Tailwind is a term used to describe events or market forces that exert a positive influence on an investment’s performance.
The Tax Cuts and Jobs Act (TCJA) of 2017 was a sweeping revision of the U.S. tax code that reduced taxes for individuals and businesses. The changes for businesses created a single flat corporate tax rate of 21% and also affected deductions, depreciation, expensing, tax credits, and other tax items that affect businesses. The corporate tax cut is permanent. The individual tax cuts are scheduled to expire in 2025.
Variable rate debt consists of loans with interest rates that are tied to an underlying benchmark interest rate and thus change over time as the underlying benchmark rate fluctuates.
A “wall of worry” is an expression in finance used to describe stocks that manage to rise even when external factors raise questions about a capital market’s ability to rise.
A zero-sum game is a set of circumstances where a gain for any one party results in a loss for another.
Indices
The MSCI ACWI® (All Country World Index) measures the performance of large and mid-cap stocks across 23 developed markets (DM) and 24 emerging markets (EM) countries. Developed market countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. Emerging market countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI EAFE (Europe, Australasia, and the Far East) Net Index measures the performance of performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The MSCI EAFE Net Index subtracts any foreign taxes applicable to US citizens but not applicable to citizens in the overseas country.
The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 7% of the total market capitalization of the Russell 3000® Index.
The S&P 500 Index measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”).© LSE Group 2025. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor, or endorse the content of this communication.
M-752727 Exp. 10/9/2025
The U.S. Court of International Trade blocked the majority of U.S. President Donald Trump’s tariffs for less than 24 hours before a federal appeals court paused the ruling.
The U.S. Federal Reserve (Fed) stressed that its path of policy will depend entirely on incoming economic information.
Volatility will likely increase as budget legislation evolves through the senate and the legality of Trump’s tariffs are questioned.
Despite the markets being closed on Memorial Day, last week was one of the busiest news weeks of the year. Markets opened on Tuesday with a mini trade war between the United States and the European Union, which had begun after Friday’s close.1
“The most narrative-altering news broke on Wednesday, when the U.S. Court of International Trade (CIT) blocked Trump’s International Emergency Economic Powers Act (IEEPA)-induced tariffs,” said Joey Del Guercio, CFA, Market Strategy Research Associate at Raymond James Investment Management. These were the fentanyl-focused tariffs and “reciprocal” tariffs announced on April 2, which affected more than 60 U.S. trading partners.
“This was huge news for less than 24 hours, and then a federal appeals court paused the CIT’s ruling, restoring Trump’s ability to leverage IEEPA and reinstate the tariffs,” Del Guercio said.
The ruling may have overshadowed gross domestic product (GDP) data, a Personal Consumption Expenditures (PCE) Price Index update, and an earnings report from NVIDIA, the largest company in the world by market capitalization. Each of these releases can command investor attention, but Del Guercio feels like they were almost entirely deprioritized last week. He believes that last week’s changing priorities were a reminder that uncertainty is here to stay.
“While I expect this uncertainty to persist, it feels like the market is getting increasingly calibrated to all of the noise, which I expect to continue going forward,” said Del Guercio. “Despite all the uncertainty in the news, the CBOE Volatility Index (VIX) is only mildly elevated, and the S&P 500 Index had its best month since 2023 and its best May since 1990.”
Following its torrid rally from the depths of the Liberation Day aftermath, the S&P 500 Index remains down 4% from its February all-time high, and Del Guercio thinks it’s reasonable to expect some short-term consolidation in equities. Given this outlook, he maintains that investors would be wise to avoid chasing this market higher. Instead, they might consider remaining patient and opportunistically building positions on pullbacks.
“From my view, it’s increasingly apparent that the Fed is in absolutely no rush to cut its policy rate,” said Del Guercio. “Last week, both core and headline inflation showcased further disinflation, and super core PCE declined month-over-month for the first time since 2020.” However, given all the potential first-, second-, and third-order effects of trade and greater fiscal policy, Del Guercio said that investors have acquired little to none of the clarity that the Fed finds necessary to cut interest rates.
Del Guercio said that another event failing to receive the coverage it deserved last week was U.S. President Donald Trump meeting with Fed Chair Jerome Powell for the first time since inauguration day. Following the closed-door meeting, the Fed put out a brief statement explicitly stressing that “the path of policy will depend entirely on incoming economic information.” Then, the White House press secretary reiterated the Trump administration’s belief that the Fed Chair is making a mistake by not lowering interest rates.
“In my opinion, the Fed is in a comfortable position to wait, and Powell is under no real political pressure to cut rates,” said Del Guercio. “Should a recession materialize, the man who put tariffs on 60 countries would likely get the blame, not the man who kept rates steady in the face of above-target inflation and resilient growth.”
Del Guercio thinks that a sustained deterioration in the labor market would be the biggest inspiration for a Fed cut. This week’s labor data from the Job Openings and Labor Turnover Survey (JOLTS), ADP® National Employment Report™, and Non-Farm Payrolls (NFP) report will hold important insights.
Del Guercio said that last week’s earnings results from NVIDIA capped off a first quarter in which S&P 500 Index constituents reported earnings that were broadly better than expected. 10 of the 11 sectors in the S&P 500 Index posted earnings per share (EPS) growth that exceeded consensus pre-season earnings estimates. The broader index posted its second straight quarter of double-digit EPS growth. Over 60% of the companies reported a positive revenue surprise, and more than three quarters of the companies posted a positive EPS surprise.
“NVIDIA’s earnings were another reminder that Artificial Intelligence (AI) is here to stay. The massive amount of capital expenditure (capex) dollars being spent to build out the AI ecosystem are persistent with interest in the space accelerating,” said Del Guercio. “Despite all the talk about prudent capital decision planning in the face of Trump’s tariffs, capex beneficiaries continue to grow their backlogs.”
Now that the market is firmly between earnings seasons, Del Guercio believes that investor focus will increasingly shift towards policy news and long-term investment themes, which are somewhat interconnected. This was demonstrated in headlines from two weeks ago claiming that Trump’s nuclear power policy sent myriads of related equities up +20-30% in a single day.
“Other thematic areas like AI enablers, the hyperscalers, cybersecurity, and defense have already corrected,” said Del Guercio. “With sentiment on the mend, I think it makes sense to consider leaning into long-term megatrends by opportunistically buying on dips.”
Del Guercio expects policy uncertainty to continue driving the chief market narrative. Volatility is likely to increase from here as U.S. budget legislation evolves through the senate and the legality of Trump’s tariffs are questioned. If Trump loses his IEEPA privileges, he has other avenues to pivot to, including Section 301 and Section 232.
“Fade the short-term, whiplash-inducing news flow and consider leaning into long-term durable market trends that are agnostic to short-term policy narratives — like AI and defense spending. Above all else, consider keeping portfolios diversified to not get caught offsides should volatility spike,” said Del Guercio.
Small- and mid-caps. While last week’s court decisions weren’t the clean relaxation of trade policy Del Guercio was looking for, he thinks the continued progress could suppress recession fears in the short-term, which have been a major hurdle down market cap. “Small caps continue to disappoint, but I think the risk/reward is too favorable to ignore the gaping valuation differential versus large caps,” Del Guercio said. “Mid caps continue to perform well year to date, and I expect this strong performance to continue as quality-biased investors move down market cap.”
Industrials. Del Guercio thinks it still makes sense to consider leaning into cyclicals and higher beta securities broadly when dips present themselves, but he is largely focused on industrials. In his opinion, industrials have somewhat sneakily become the second-best performing S&P 500 Index sector year to date, only lagging utilities. Many industrial companies are levered to long-term trends with multi-year tailwinds, like aerospace and defense, domestic manufacturing, and AI’s expeditiously growing infrastructure.
International. Del Guercio made the case for ratcheting up exposure to international equities as markets continue to question U.S. exceptionalism. To be clear, the U.S. is still his favored region, but a continuation of the dollar’s decline and elevated domestic yields bode well for international equities. “With the U.S. still comprising about 63% of the MSCI All Country World Index, large gains can accrue to markets that catch a marginal reallocation away from domestic equities,” said Del Guercio. Despite their strong performance, financials in general and mainly European defense names remain his favored areas of interest.
This week focuses on labor data: JOLTS on Tuesday, the ADP Employment Report on Wednesday, and weekly jobless claims, productivity, and unit labor costs data on Thursday. The Non-Farm Payrolls report will be released on Friday along with unemployment data. U.S. Manufacturing and Services Purchasing Managers’ Index (PMI) data will also be released this week. And on Thursday, the European Central Bank will announce its policy rate decision.
1 Unless otherwise indicated, all data cited is sourced from Bloomberg as of May 30, 2025.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Link(s) are being provided for informational purposes only. Raymond James Investment Management is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James Investment Management is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Investing in bonds involves risks that may adversely affect the value of your investment such as inflation risk, credit risk, call risk, interest rate risk, and liquidity risk, among others. The two most prominent factors are interest rate movements and the credit worthiness of the bond issuer. Investors should pay careful attention to the types of fixed income securities that comprise their portfolios and remember that, as with all investments, there is the risk of loss of capital.
Bond Ratings: Ratings are by Moody’s, S&P, and/or Fitch. Ratings provided by nationally recognized statistical rating organizations, also called ratings agencies, are appraisals of a particular issuer’s creditworthiness, including the possibility that the issuer will not be able to pay interest or repay principal. Ratings are not recommendations to buy, sell or hold a security, nor do ratings remove market risk. Securities with the same rating can actually trade at significantly different prices. In addition, ratings are subject to review, revision, suspension, reduction or withdrawal at any time, and a rating agency may place an issuer under review or credit watch. Additionally, Fitch reports are available for municipal bonds. More about ratings is available at moodys.com, standardandpoors.com, and fitchratings.com.
Definitions
The ADP® National Employment Report™ is published monthly by the ADP Research Institute® in close collaboration with Moody’s Analytics. The ADP® National Employment Report™ provides a monthly snapshot of U.S. nonfarm private sector Employment based on actual transactional data.
AI Enablers are individuals who bring together actionable knowledge about AI’s possibilities and have a deep understanding of their own business.
Artificial intelligence (AI) is technology that enables computers and machines to simulate human learning, comprehension, problem solving, decision making, creativity and autonomy.
Beta is an indicator of the price volatility of a stock or other asset in comparison with the broader market. It suggests the level of risk that an investor takes on in buying the stock. The higher the beta number, the higher the risk.
Capital expenditures, or capex, are monies used by a company to buy, improve, or maintain physical assets such as real estate, facilities, technology, or equipment, and may include new projects or investments.
Consolidation is a term used in technical analysis to describe when stocks reverse previous gains (or losses) to stay within well-defined trading levels.
Core inflation is measured by the Personal Consumption Expenditures (PCE) excluding Food and Energy, Price Index, also known as the core PCE price index, is a measure of the prices that U.S. consumers pay for goods and services, not including two categories – food and energy – where prices tend to swing up and down more dramatically and more often than other prices. The core PCE price index, released monthly by the U.S. Department of Commerce Bureau of Economic Analysis, measures inflation trends and is watched closely by the U.S. Federal Reserve as it conducts monetary policy.
Core services inflation excluding shelter, sometimes called “super core” inflation, is a version of core inflation that excludes prices for food, energy, and housing. Core inflation includes a measure of housing services, which is what households pay for rent or the equivalent for those who own their homes.
Disinflation refers to the temporary slowing of the pace of price inflation and describes what happens when the inflation rate is marginally lower over the short term. Disinflation refers only to the rate of change in the rate of inflation. In this, it is distinct from inflation and deflation, which describe the direction of prices.
Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.
Fiscal policy refers to the tax collection and spending a government uses to influence its country’s economy. Fiscal risk can arise from, among other things, excessive deficit spending, which consists of government spending over a specific period of time that exceeds the revenues that the government takes in for the same period. High levels of debt and large deficits can push interest rates higher and limit a government’s ability to respond to economic downturns.
Gross domestic product (GDP) is the total value of goods and services provided in an economy during a specified period, often one quarter or one year.
Headline inflation is the raw inflation figure reported in relation to the Consumer Price Index (CPI), which is released monthly by the Bureau of Labor Statistics (BLS).
Hyperscalers refers to the largest cloud computing providers that can provide massive amounts of computing resources and storage at enterprise scale.
The International Emergency Economic Powers Act (IEEPA) provides the President broad authority to regulate a variety of economic transactions following a declaration of national emergency. IEEPA, like the Trading with the Enemy Act (TWEA) from which it branched, sits at the center of the modern U.S. sanctions regime.
The Job Openings and Labor Turnover Survey (JOLTS) program produces monthly data on job openings, hires, and separations compiled by the U.S. Bureau of Labor Statistics. The survey’s job openings rates consider month-to-month changes in the number of job openings reported on both a state and national level.
Levered, in the context of companies that are levered to long-term trends with multi-year tailwinds, means companies with earnings that directionally follow the expansion of those themes.
Liberation Day is a term used by President Donald Trump to refer to April 2, 2025, when he announced a wide range of unexpectedly high tariffs on many U.S. trading partners, triggering a global selloff of risk assets.
Market capitalization, or market cap, refers to the total dollar market value of a company’s outstanding shares of stock.
Nonfarm payroll refers to the number of jobs in the private sector and government agencies. It excludes farmworkers, private household employees, proprietors, nonprofit employees, and actively serving military. The nonfarm payroll numbers are reported monthly to the public through the closely followed employment situation report, which details changes in unemployment by sector and demographic and new jobs added within the economy.
The United States Court of International Trade, established under Article III of the Constitution, has nationwide jurisdiction over civil actions arising out of the customs and international trade laws of the United States.
The payroll report, officially known as the Employment Situation Summary, is a monthly U.S. Bureau of Labor Statistics (BLS) report tracking nonfarm payroll employment and the national unemployment rate, with data on changes in average hourly earnings, and job trends in public and private sectors of employment. The report is based on surveys of households and employers.
The Personal Consumption Expenditures (PCE) Price Index is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index, released monthly by the U.S. Department of Commerce Bureau of Economic Analysis, is known for capturing inflation or deflation across a wide range of consumer expenses and reflecting changes in consumer behavior.
A pullback is a temporary pause or drop in the price of a security that previously had been rising.
The Purchasing Managers’ Index (PMI) measures the prevailing direction of economic trends in the manufacturing sector. It is created by the Institute for Supply Management (ISM), and consists of an index summarizing whether market conditions as reported in a monthly survey of supply chain managers are expanding, staying the same, or contracting.
A reciprocal tariff is a tax or trade restriction that one nation imposes on another on a tit-for-tat basis in response to a trade-restriction actions taken by the nation that is the subject of the reciprocal tariff.
Under Section 232 of the Trade Expansion Act of 1962, the head of any department or agency, or any “interested party” may request that the Secretary of Commerce investigate the effects of a specific import on U.S. national security.
Section 301 of the Trade Act of 1974 grants the Office of the United States Trade Representative (USTR) a range of responsibilities and authorities to investigate and take action to enforce U.S. rights under trade agreements and respond to certain foreign trade practices.
Super core PCE, sometimes called core services inflation excluding shelter, is a version of core inflation that excludes prices for food, energy, and housing. Core inflation includes a measure of housing services, which is what households pay for rent or the equivalent for those who own their homes.
The acronym TACO, meaning “Trump always chickens out,” describes an investment approach in response to Trump’s tariff policies. TACO trade describes many investors’ strategy to buy into the market that dips when Trump announces steep tariffs on the assumption that he will back off his tariff order, and the market will rebound.
Tailwind is a term used to describe events or market forces that exert a positive influence on an investment’s performance. The opposite of a tailwind is a headwind, which contributes to an investment’s underperformance.
U.S. exceptionalism or American exceptionalism is an idea centered on the notion that the United States is a unique and even superior nation as a result of historical, ideological, religious, and/or, in the context of finance, economic reasons. Proponents of American exceptionalism often expect or advocate for the United States to occupy or play a leading role in global affairs.
Indices
The CBOE Volatility Index, or VIX, is a real-time market index representing the market’s expectations for volatility over the coming 30 days. Investors use the VIX to measure the level of risk, fear, or stress in the market when making investment decisions.
The MSCI ACWI (All Country World Index) ex USA Index captures large- and mid-cap representation across 22 of 23 developed markets countries (excluding the United States) and 24 emerging markets countries. With 2,228 constituents, the index covers approximately 85% of the global equity opportunity set outside the United States. Developed markets countries include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the U.K. Emerging markets countries include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The S&P 500 Index measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 98% of the total market capitalization of the Russell 3000® Index.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”).© LSE Group 2025. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor, or endorse the content of this communication.
M-750550 Exp. 10/2/2025
