“
”Markets in Focus
Timely analysis of market moves and sectors of opportunity
First-quarter earnings reports did not meaningfully reflect the impact of tariffs, but companies are generally reporting strong results that include growing profit margins.
Markets may need to revise their estimates downward for the remainder of 2025 to accommodate changing interest rate forecasts and the eventual impact of trade deals.
What started as a painful squeeze has morphed into a melt-up across equity markets, and a reset of investor positioning could support an extension of the rally.
After a tumultuous April, markets seem to be on the road to recovery.1 Matt Orton, CFA, Chief Market Strategist for Raymond James Investment Management, has identified a few forces that could be constructive for equity investors.
Stronger than expected earnings growth coupled with meaningful White House pivots on tariff policy have added to a sense of optimism. “We may have seen the lows from this self-inflicted correction, and the market could be working through a bottoming process,” Orton said. “I’m encouraged by the price action in companies with smaller market capitalization — the Russell 2000 posted five consecutive weeks of gains — and the continuing narrowing of credit spreads.”
Small caps are on their longest weekly win streak since late 2023
Russell 2000 Index number of consecutive weekly gains since 2020
Source: Bloomberg, as of 5/9/25.
For U.S. and global equities, Orton believes that the path of least resistance remains higher, unless economic data deteriorates. However, he cautioned against chasing performance and added that he believes dips could be potential buying opportunities.
Despite the elevated uncertainty related to Tuesday’s Consumer Price Index data, Thursday’s retail sales data, and increasing expectations for trade deals, the resulting market moves may be less extreme. “Left tail risk has been significantly reduced, and the equity reaction to positive tariff news is starting to get more muted, which suggests that asymmetry is shifting slowly to the downside as positioning gets more balanced.” Orton said.
90% of S&P 500 Index companies have reported their first-quarter earnings, and the blended, year-over-year earnings growth rate for the S&P 500 is 13.4%, well ahead of the 7.1% pre-season consensus. The net profit margin stands at 12.7%. “Earnings results might not be as helpful as usual, given they do not yet meaningfully reflect the impact of tariffs, but they are still worth discussing given just how good the first quarter has been.” Orton said. “These are very strong results — especially the growing profit margins — given all the uncertainty around tariffs.”
The majority of beats were concentrated in the technology and communication services sectors, but Orton said that nearly every sector is reporting earnings-per-share growth that exceeded expectations. “Despite these great numbers, I think we can all agree that growth is going to slow, at least in the near term, as a result of pervasive uncertainty and tariff implementation, which should feed into earnings results,” he said.
“I don’t think we’ve seen quite enough of a downward revision of estimates for the remainder of 2025, and this adjustment is another potential source of risk in the near term,” Orton said. “If we continue to see progress on trade deal negotiations and additional carve-outs or pivots from the administration, any market adjustment doesn’t need to be deep or long lasting.”
While Orton remained optimistic, he said that investors need to consider some of the key risks that remain. After last week, the U.S. Federal Reserve’s (Fed’s) reluctance to come to the rescue has been front and center. Fed Chair Jerome Powell declined to say whether the most likely move for rates would be a cut or hike, indicating that the Federal Open Market Committee lacks the conviction to act. Powell repeated throughout last week’s press conference that the committee was patient and not in a hurry; he wouldn’t rule out the idea that rates might stay unchanged into 2026.
“Market expectations for this year’s rate cuts are still not aligned with the Fed,” Orton said, “and investors will have to reconcile with this reality at some point.” Reconciliation risks — coupled with complacency around tariffs — could be a source of volatility, but Orton noted that they could also be a good chance to consider redeploying capital.
Orton said that investors are rightfully enthusiastic around all of the talk of trade deals, but even the United Kingdom’s recent framework and the progress made with China still amount to meaningful increases in the effective tariff rates borne by American businesses and consumers. Over the weekend, Orton discussed these issues on CNBC’s Squawk Box Asia.
“What started as a painful squeeze has morphed into a melt-up across equity markets,” Orton said. In his view, investor positioning resetting to be more neutral could support an extension of the rally. Commodity trading advisors remain very short, which could motivate them to buy as market volatility normalizes. Buybacks are also providing a tailwind in the near term. Soft data is turning marginally more positive in the absence of deteriorating hard data, and put–call ratios, credit spreads, and implied volatility have largely returned to their levels from before Liberation Day.
Orton said that investors need to be more selective and risk-aware going into the next phase of the recovery, when dispersion will be higher. “Selectivity is critical right now, but the good news is that there seem to be plenty of opportunities across the market. I would consider building balance in portfolios — between growth and value, across geographies, and across asset classes — and explore leaning into long-term, durable secular growth themes,” he said. In addition to leaning into higher beta, cyclicals, and artificial intelligence (AI) adjacencies, he suggests that investors consider:
Continuing to balance growth and value. Most of value’s promising performance reversed after strong earnings results from hyperscalers and many software companies. Orton said that businesses affected by AI trades, like the electric equipment companies that are levered to the continued buildout of data centers, also reported strong results. “This has been a part of the market where using dips as possible buying opportunities has looked attractive, and the recovery has helped growth outperform more recently,” Orton said. However, he noted that large value sectors, like financials and large banks in particular, have posted strong earnings results and showed durability in the face of macroeconomic uncertainty. He suggested that investors consider balancing their exposure to both segments of the market.
Maintaining global diversification. U.S. equities staged a strong rally from their April 8 lows, but international equities have also been able to maintain their performance over the past weeks. “I’ve never subscribed to the notion that U.S. exceptionalism is dead, instead suggesting that Europe and other regions can also post strong performance,” Orton said. He believes that support for U.S. assets can persist from domestic and many overseas investors if they keep seeing stable economic data and re-emerging optimism around trade deals. “Let’s also not forget that the blended earnings-per-share growth rate of S&P 500 companies is 13.4% in the United States while that figure is still negative in Europe,” he said. There is scope for this to reverse, and investors are seeing encouraging signs of growth. Outside of Europe, Orton said that emerging markets can continue to benefit from a structurally weaker dollar, and he sees interesting opportunities in places like India and Latin America.
Watching for small-cap recovery.Beaten-down small caps, which were most vulnerable to steep tariffs, were Monday morning’s biggest winners after the de-escalation in China–U.S. trade tensions. The Russell 2000 Index has underperformed the Russell 1000 Index by over 500 basis points year to date (-8.90% vs. -3.32%), which gives it a lot of room to catch up. The Russell 2000 Index has also posted five consecutive weeks of gains, possibly because tariff announcements set the bar so low that most firms are now able to clear it. “If we continue to see progress on the trade front, along with a dollar that remains in a long-term downtrend, I think that sets up a very supportive near-term environment for smaller companies,” Orton said.
With earnings season largely complete, the market is going back to an environment that is driven more by macroeconomic catalysts. U.S. President Donald Trump is also headed to the Middle East this week, which could create headline risk around geopolitics and oil.
April’s U.S. Consumer Price Index data will be released on Tuesday. Several regional business and consumer confidence surveys — including the Empire State Manufacturing Survey, business outlook surveys from the Federal Reserve Bank of Philadelphia, and the University of Michigan Index of Consumer Sentiment — will be released on Thursday and Friday.
Hard data, including April’s Retail Sales Report and industrial production, will be released on Thursday. U.K. gross domestic product and wage data will also be released on Thursday, which could steer interest-rate expectations for the Bank of England. And Fed Chair Jerome Powell is scheduled to speak on Thursday.
1 Unless otherwise indicated, all data cited is sourced from Bloomberg as of May 9, 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.
Definitions
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%.
A beat is when a company’s reported earnings or other business results exceed or are better than the expectations of analysts and others who follow the company’s stock. A beat and raise refers to a company that reports earnings that exceed expectations and delivers guidance that also is better than expected.
Blended results combine actual results such as earnings or other metrics for companies that have reported earnings and estimated results for companies that have yet to report.
Beta is a measure of the volatility or systemic risk of a security, group of securities, or portfolio compared with the market as a whole.
A commodity trading advisor (CTA) is an investment professional or firm that provides client-specific advice on buying and selling futures contracts.
A consensus estimate is a forecast of a public company’s projected earnings, the results of a particular industry, sector, geography, asset class, or other category, or the expected findings of a macroeconomic report based on the combined estimates of analysts and other market observers that track the stock or data in question.
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.
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.
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 Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York.
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 Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey is a monthly survey in which manufacturers in the Third Federal Reserve District, which includes Pennsylvania, New Jersey, and Delaware, indicate the direction of change in overall business activity and in various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, prices paid, and prices received.
The Federal Reserve Bank of Philadelphia Nonmanufacturing Business Outlook Survey is a monthly survey of non-manufacturers in the Third Federal Reserve District, , which includes Pennsylvania, New Jersey, and Delaware. Participants indicate the direction of change in overall business activity and in the various measures of activity at their firms, including new orders, sales or revenues, employment, prices, and capital expenditures. Respondents also provide their assessments of general business conditions over the next six months.
Growth investing is a stock-buying strategy that focuses on companies expected to grow at an above-average rate compared to their industry or the market.
Hyperscalers refers to the largest cloud computing providers that can provide massive amounts of computing resources and storage at enterprise scale.
Companies that are levered to the continued buildout of data centers have earnings that directionally follow infrastructure investments made to build new data centers.
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. The announcement triggered 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.
Melt up refers to a sudden and sustained rise in the price or investment performance of a security or larger group of securities. Melt ups can take place as investors rush not to miss out on a suddenly popular investment strategy.
A net profit margin, often shortened to net margin, measures how much net income or profit a company generates as a percentage of revenue. It can be expressed as a percentage or a decimal.
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.
The Retail Sales Report is a monthly U.S. Census Bureau report that seeks to provide current estimates of sales at retail and food services stories and inventories held by retail stores, based on a survey of about 13,000 retail businesses, supplemented by estimates for other employers.
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.
Tail risk describes a form of portfolio risk associated with the increased possibility that an investment will move more than three standard deviations from the mean in a normal distribution. Left tail risks refer to unusually large losses.
Tailwind is a term used to describe events or market forces that exert a positive influence on an investment’s performance.
The University of Michigan Index of Consumer Sentiment is based on monthly telephone surveys in which at least 500 consumers in the continental United States are asked 50 questions about what they think now and what their expectations are for their personal finances, business conditions, and buying conditions. Their responses are used to calculate monthly measures of consumer sentiment that can be compared to a base value of 100 set in 1966.
Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.
Indices
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 93% of the total market capitalization of the Russell 3000® Index.
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.
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-740456 Exp. 9/12/2025
The S&P 500 Index has posted nine consecutive days in the green for the first time since November 2004.
Still, business confidence is weak and stagflationary risks remain as tariffs on goods from China begin to feed into the economy in the coming quarter.
With uncertainty running high, Matt Orton, CFA, says diversification remains essential. Areas he’s watching include European equities, companies benefiting from durable secular growth trends, and small caps.
The past month has been a wild ride.
If you had just gone to sleep at the end of March, you could be forgiven for thinking that nothing happened during April when looking at the S&P 500 Index or 10-year U.S. Treasury yields — until you looked at the dollar, volatility metrics across asset classes, or just about any sentiment barometer.1 They all point to the shocks we’ve endured and the heightened level of uncertainty going forward. The S&P 500 comes into this week on solid footing having posted nine consecutive days in the green, the first time that has occurred since November 2004.
“Last week I said the market appeared to be bottoming and that it made sense to start considering high-quality companies levered to durable growth themes that were thrown out with the bathwater,” said Matt Orton, CFA, Chief Market Strategist at Raymond James Investment Management. “I believe that continues to make sense as better than feared earnings and continued pivots from the White House have supported the bottoming process.”
That said, he added that selectivity and patience are still essential. Underlying business confidence is quite weak while stagflationary risks remain as tariffs on goods from China begin to feed into the economy over the coming quarter. There will be bumps as markets digest the degree of incoming economic weakening, but Orton is inclined to use dips opportunistically and to focus on higher-conviction ideas as he believes that the worst left-tail scenarios for the economy have been removed and that the underlying strength of the economy has been underappreciated.
“I believe diversification remains essential — across asset classes, geographies, and sectors and industries — as uncertainty remains high, but there appear to be plenty of potential opportunities for investors to consider as they seek to deploy capital and to better balance their portfolios.”
Orton believes it’s important to lay out both the bear and bull arguments for the market right now so that investors can fully appreciate and weigh the risks and opportunities.
Despite the uncertainty, the S&P 500 is back where it was before Liberation Day
S&P 500 performance since April 1
Source: Bloomberg, as of 5/2/25.
So, what are bears saying right now? For starters, the S&P 500 is back at pre-Liberation Day levels. Many bears he speaks with have argued that the rally off the lows was more a function of position capitulation than an “all clear” signal for risk. While generally mega-cap tech earnings certainly helped, positioning was quite offsides following the DeepSeek shock, so it was not surprising to see these stocks bounce. We’re still seeing earnings downgrades, and slowing growth should lead to additional price-to-earnings compressions, both of which could pressure equities after a strong move off the lows. Additionally, the longer the uncertainty and trade disruptions persist, the deeper the scarring on the economy. In particular, small businesses are essential to the relatively strong job market, but Orton said there is a lot we don’t know about how inflation could affect them and their ability to manage margins and their workforce. The U.S. Federal Reserve (Fed) also is unlikely to come to the rescue given the combination of strong data and rising inflation expectations.
And what are some of the key arguments on the bullish side?
“Critically, I don’t think the bullish argument is one that claims ‘everything is awesome,’ ” Orton said. “Rather, I think it’s one of nuance and is based on the idea that there is a reasonable path forward that avoids recession.”
That path is based on the administration listening to markets and quickly pivoting away from the most destructive “reciprocal” tariff policies announced on Liberation Day. Administration officials also are increasingly focused on issues that Orton said should have been addressed from the start. These include making the Tax Cuts and Jobs Act (TCJA) permanent and starting to lower the burden of overregulation. Progress on these issues could provide offsets to some of the damage from tariffs, he said. Capital expenditures (capex) from the hyperscalers aren’t slowing and that provides an additional ballast to the economy by offsetting delays in projects across other sectors due to elevated uncertainty.
“While earnings revisions are sending a negative signal, it’s worth noting that we’re largely seeing marginal adjustments to earnings forecasts, not the larger step-downs that many had feared,” Orton said. “Perhaps that means we’re whistling past the graveyard. Or perhaps there’s more resiliency than feared — especially if the White House starts to get trade deals signed.”
Corporate margins also remain high, he said, with the blended net profit margin for the S&P 500 currently at 12.7% – ahead of last quarter.
Following nine consecutive days of gains for the S&P 500, the market looks a bit stretched in the short term, Orton said. He expects Fed Chair Jerome Powell to strike a more hawkish tone at the press conference following this week’s meeting of the Federal Open Market Committee (FOMC). That could take some wind out of the market’s sails in the short term. Interest rate cut expectations for 2025 remain too high, in his opinion, especially given the strong base from which any economic weakening is coming. Any adjustments following the FOMC meeting could lead to some short-term volatility that he believes could present an opportunity to add to specific parts of the market.
It’s also worth paying attention to some technical dynamics across the market and in single stocks, notably leverage ratios (how much investors are borrowing) and short interest (how many investors are betting against the market), Orton said. Extreme bearishness fueled by tariffs and recession risk has driven a meaningful dispersion between gross and net leverage. Net leverage (the difference between long and short positions) has dropped while gross leverage (the total of all positions) has risen as short sellers have pressed ahead. This signals that positioning is still bearish. In this environment, Orton said even bearish investors should be on guard for an abrupt reversal. If positive news hits while too many investors are betting against stocks, a sudden rally could push prices up quickly (i.e., a short squeeze).
With these circumstances in mind, here are some areas Orton is watching now:
MAGA to MEGA. Orton believes market moves suggest a verifiable rotation out of U.S. assets into European markets. Support for U.S. assets can persist from domestic and many overseas investors insofar as we keep seeing stable hard economic data and re-emerging optimism around trade deals. But there is tangible evidence of a rotation out of U.S. assets into European markets by European investors. We’ve already seen a meaningful increase of inflows to European funds, and there is scope for that to accelerate. European investors hold nearly $9 trillion in U.S. equities — even if they rotate just 5% back into their local markets, that equates to about $450 billion, compared with the $35 billion we’ve seen moved so far year to date. European earnings have been stronger than expected, and there are some positive near-term catalysts like the German fiscal package and the ReArm Europe effort. Orton came into this year optimistic on international equities, especially European financials and defense companies. He believes there could be durability to these trades. Meanwhile, other important international markets like Japan have held up and he believes Japanese banks look interesting given attractive valuations and a supportive rate environment.
Durable secular growth themes. The artificial intelligence (AI) trade has found a lifeline over the past two weeks with strong earnings across many software companies and the hyperscalers. Capex budgets have been maintained or raised for the rest of 2025, and earnings suggest that the underlying strength of the AI-exposed segments of these companies is helping to offset weakness in more consumer/tariff-exposed parts of the business. In addition to the mega-caps and software, we’ve had strong reports from some of the AI-adjacent trades like electric equipment companies that are levered to the continued buildout of data centers. This has been a part of the market where potential buying opportunities have looked attractive, and Orton believes they still do given the damage that was done post-DeepSeek and the beats and raises from management teams. Outside of AI, he also believes other meaningful secular growth themes have provided investors with potential opportunities, including medical device companies that are supported by an aging population with more chronic diseases and high-quality companies attuned to changing consumer trends.
When will small caps work again? Smaller companies have had a tough time, suffering as post-election enthusiasm about the prospects for growth pushed up interest rates but also after Liberation Day as recession worries spiked. There has been no reason to add risk here all year, but Orton said he can’t help but feel there could be at least a tactical opportunity down the market-cap spectrum assuming things hold up after what he expects to be a more hawkish message from the FOMC. Dislocations in small caps hit new record lows with the relative performance of the Russell 2000® Index versus the Russell 1000® Index at new all-time lows dating back to 1979, while the Russell 2000 has its smallest weight ever as a percentage of the Russell 3000® Index — and that’s with a lower concentration in large caps. At its relative lows, the Russell 2000 was down nearly 30% from its last all-time high in November 2021, so clearly a lot has been priced into small caps. A steeper yield curve, a weaker dollar, and the potential for the Fed to cut interest rates later in the year give Orton some hope that if we see technical indicators hold up, there’s the potential for, at a minimum, a tactical tilt toward small caps.
The FOMC is expected to keep rates on hold. In Europe, traders are fully pricing in a quarter-point rate cut at this week’s Bank of England meeting, while Sweden’s Riksbank and Norway’s Norges Bank are both expected to hold rates steady.
On the economic front, markets get the Services ISM® Report on Business® on Monday, an update on the U.S. trade balance on Tuesday, and weekly initial jobless claims data on Thursday.
On Tuesday, U.S. Treasury Secretary Scott Bessent is due to discuss fiscal and economic policy at a House appropriations panel hearing and could shed light on trade talks with major U.S. trading partners, particularly China. On Friday, markets expect to get post-FOMC comments from Federal Reserve Bank of New York President John C. Williams, Federal Reserve Bank of Chicago President Austan Goolsbee, and Federal Reserve Board of Governors members Christopher Waller, Michael Barr, and Adriana Kugler.
1 Unless otherwise indicated, all data cited is sourced from Bloomberg as of May 2, 2025.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
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.
There are risks associated with dividend investing, including that dividend-issuing companies may choose not to pay a dividend, may not have the ability to pay, or the dividend may be less than what is anticipated. Dividend-issuing companies are subject to interest rate risk and high dividends can sometimes signal that a company is in distress. Dividends are not guaranteed and must be authorized by the company’s board of directors.
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.
Definitions
A beat is when a company’s reported earnings or other business results exceed or are better than the expectations of analysts and others who follow the company’s stock. A beat and raise refers to a company that reports earnings that exceed expectations and delivers guidance that also is better than expected.
Blended results combine actual results such as earnings or other metrics for companies that have reported earnings and estimated results for companies that have yet to report.
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.
Capitulation in finance refers to a general abandonment of an investment position by investors who sell en masse in reaction to changes in market sentiment or dynamics. The resulting marked drop in asset prices is watched as a potential end of a market decline, since those who held on to their shares during the capitulation are not expected to sell afterward.
Concentration is a term used to describe the extent to which investments in a portfolio, group of portfolios, industry, sector, index, or particular geography or clustered in groups that share specific factors or other characteristics.
Conviction represents a market participant’s confidence in particular investments or the likelihood that particular outcomes will take place. High-conviction investments represent what participants consider to be their best bets for performance for a given outlook or period.
DeepSeek is a Chinese artificial intelligence startup that in January 2025 became a leading free downloadable app in the United States. This followed DeepSeek’s announcement that its AI model performed as well as market-leading models and that it was developed at a significantly lower cost. This led to a selloff of well-known U.S. technology stocks on Jan. 27, 2025.
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.
Earnings revision ratio refers to the ratio of analysts’ earnings upgrades to downgrades for a given group of stocks.
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.
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.
Hawkish, dovish, and centrist are terms used to describe the monetary policy preferences of central bankers and others. Hawks prioritize controlling inflation and may favor raising interest rates to reduce it or keep it in check. Doves tend to support maintaining lower interest rates, often in support of stimulating job growth and the economy more generally.
Hyperscalers refers to the largest cloud computing providers that can provide massive amounts of computing resources and storage at enterprise scale.
Initial jobless claims, reported weekly by the U.S. Department of Labor, track the number seasonally adjusted first-time claims for unemployment insurance filed by unemployed workers.
A leverage ratio in equities is a technical indicator that tracks levels of borrowing by investors. Gross leverage reflects the total of all long and short positions in the market. Net leverage reflects the difference between long and short positions.
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 long position refers to the purchase of a security with the expectation that it will rise in value, reflecting a bullish attitude.
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.
A net profit margin, often shortened to net margin, measures how much net income or profit a company generates as a percentage of revenue. It can be expressed as a percentage or a decimal.
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.
The ReArm Europe Plan/Readiness 2030 plan includes legal and financial means to support the defense investments of member states of the European Union and to increase defense capabilities of member states quickly and significantly.
Rotation describes the movement of investments in securities from one industry, sector, factor, or asset class to another as market participants react to or try to anticipate the next stage of the economic cycle.
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.
The Services ISM® Report on Business® is produced by the Institute for Supply Management (ISM) and is based on data compiled from purchasing and supply executives in a wide variety of industries nationwide. Survey responses reflect the change, if any, in the current month compared to the previous month in supplier deliveries along with seasonally adjusted business activity, new orders, and employment. // The non-manufacturing Purchasing Managers’ Index (PMI), also known as the ISM Services PMI, measures the prevailing direction of economic trends in the non-manufacturing sector. It is created by the Institute for Supply Management (ISM).
Short interest is the number of shares that have been sold short and remain outstanding. Short is a term used to describe a strategy in which investors anticipate that prices of securities will fall in the short term, so, typically, they sell securities with plans to repurchase them later at a lower price. Short interest often is seen as an indicator of current market sentiment. Rising short interest signals that investors have become more bearish. Falling short interest signals that they have become more bullish.
A short position refers to a trading technique in which an investor borrows shares, sells them, and plans to buy the shares later at a lower price.
Short sellers bet that the price of an asset will decline in value. To profit off that drop, they agree to buy shares of the asset at a predetermined price on a set expiration date. In the meantime, they borrow shares of the asset to sell at the prevailing higher price with the expectation that they will be able to buy them later at the lower price attached to the expiration date.
A short squeeze refers to what happens when the price of an asset rises sharply and forces short sellers who had bet that its price would fall to buy it instead in order to avoid incurring even greater losses. In turn, those purchases put more upward pressure on the asset price.
Stagflation, first described after the oil shocks of the 1970s, is an economic condition that includes slow economic growth (or even declines in gross domestic product), relatively high unemployment, and inflation.
Tactical trading refers to relatively short-term investing decisions made in response to expected trends or changes in the market based on fundamental and technical analysis.
Tail risk describes a form of portfolio risk associated with the increased possibility that an investment will move more than three standard deviations from the mean in a normal distribution. Left tail risks refer to unusually large losses.
Technicals refers to technical indicators of historic market data, including price and volume statistics, to which analysts apply a wide variety of mathematical formulas in their study of larger market patterns.
The U.S. trade balance, or balance of trade, refers to the difference between the values of the nation’s imports and exports for a defined period of time. It is reported weekly by the U.S. Bureau of Economic Analysis in the U.S. International Trade in Goods and Services report.
A yield curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity.
Indices
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 93% of the total market capitalization of the Russell 3000® Index.
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 Russell 3000® Index measures the performance of the 3,000 largest U.S.-traded stocks, which represent about 96% of the total market capitalization of all U.S. incorporated equity securities.
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-734870 Exp. 9/5/2025
