Today was a good day for stock investors as the major indices—the Nasdaq 100 (QQQ), the S&P 500 (SPY), and the Dow Jones Industrial Average (DIA)—finished today’s trading higher. Interestingly, the financial sector (XLF) was the session’s leader, while the consumer staples sector (XLP) was the laggard. In addition, across all three ETFs, trading volume was lower than the average, which suggests that today’s optimism was cautious since investors were not rushing to buy shares. Indeed, Wall Street analysts are becoming more cautious about the stock market.
They are pointing to slowing economic growth, earnings estimates that seem too high, and the risks from global tariffs. Eric Johnston from Cantor Fitzgerald said that current stock prices don’t reflect big threats like supply chain problems and money leaving the U.S. He noted that the S&P 500 has stayed below its 200-day moving average for 18 days straight, which has often led to sharp declines in the past. Still, Johnston believes that this kind of market will offer good trading opportunities and that corporate buybacks might help support the market after earnings season.
Separately, analysts at Ned Davis Research pointed out that market valuations are still higher than normal even though stocks dropped after Trump’s “Liberation Day.” In fact, the forward P/E ratio for the S&P 500 only dropped to 19.2, while the 40-year average is 15.5. Trailing P/E ratios are also high, at 21.3 for operating earnings and 24.1 for GAAP earnings. Interestingly, they compared this to stores that raise prices before offering a “sale,” as stocks might look cheaper, but they are still expensive. A big reason for this is that earnings expectations for the first half of 2025 have already been lowered, making valuations appear more reasonable than they really are.
Interestingly, though, Chevron (CVX) CEO Mike Wirth said that he does not see any signs that the U.S. is close to a recession yet, although growth does appear to be slowing. While Trump’s new tariffs are expected to lower oil demand, Wirth said energy has mostly been left out of the tariffs, so Chevron doesn’t expect a big direct impact. However, he warned that the bigger concern is how these trade issues might affect the global economy. Wirth also mentioned that if oil prices fall to $60 per barrel, some U.S. oil production might slow down, especially onshore.