Second quarter earnings season is well under way, and its forming a positive counterpoint to a series of gloomy data releases expected this week. So far, some 100 or more of the S&P-listed firms have reported, and approximately 72% have been surprising to the upside. This runs counter to forecasts for later in this week – market watchers are expecting the Federal Reserve to bump up interest rates by another 0.75% on Wednesday, and are expecting Thursday’s Bureau of Economic Analysis release to show a contraction for Q2, which would put the US into a recession.
So which is it? Are we looking at earnings on the upside, or are we standing at the start of a recession? That may depend on the Federal Reserve; as the central bank pushes rates up to fight inflation, the higher cost of money of will put pressure on the economy, squeezing both jobs and GDP growth.
In a recent note to clients, Oppenheimer’s Chief Investment Strategist John Stoltzfus addresses these concerns. He writes, “Our view remains positive on the actions taken so far by the Federal Reserve since it pivoted in the fourth quarter of last year. We believe actions by the Fed leading to what we call ‘the end of free money’ to be a good thing for investors and the US economy. Too much liquidity in the system feeds speculation, overinvestment and distortion of valuations and expectations.”
“In our view, the Fed so far is doing the job that needs to be done while showing sensitivity to the near-term effects to the economy of its change in policy. Progress not perfection remains the order of the day in our view,” Stoltzfus added.
With Stoltzfus’ outlook in mind, we took a closer look at two stocks Oppenheimer is backing. The firm’s analysts see at least 60% upside potential in store for each. We used TipRanks platform to find out what the rest of the Street has to say.
Peloton Interactive (PTON)
The first Oppenheimer pick we’ll look at is Peloton, the interactive home workout company that reimagined home exercising, combining the venerable stationary bike with social media and digital video…