The Market's Masterpiece: A Symphony of Sectors

JPMorgan sets the tone—NVIDIA brings the fireworks. Here’s how this quarter’s market concert plays out.

 

KEY TAKEAWAYS

• Earnings season follows a predictable four-part structure, like a symphony
• Financials kick off earnings with insights into economic health and liquidity
• Industrials, materials, and staples offer clues about global trade and consumer behavior
• Healthcare and discretionary sectors show volatility and sector divergence
• Tech, AI, and utilities dominate the finale, but expectations are sky-high

MY HOT TAKES

• Earnings season is not random—it’s composed, choreographed, and emotionally charged
• Banks aren't boring—they’re the tempo setters for everything else
• Consumer staples are winning quietly due to their resilience in a shaky macro environment
• AI isn’t just a buzzword—it’s starting to reshape everything from utilities to retail
• The risk of disappointment rises the closer we get to the high-expectation tech names
• You can quote me: “This earnings season, like all others before, will follow a carefully choreographed order that will surely bring your emotions through highs and lows.”

 

Symphonic. You may not realize it, but the music we love is the result of carefully choreographed composition that is quite strict. Don’t let Beethoven’s wild hair or Mozart’s whimsical disposition fool you, these greats stuck to the rules. Most popular symphonies, for example, follow a 4-movement structure. Even if you are not a “classical” music fan, you have surely heard Beethoven’s famous Symphony No. 5 with its iconic da-da-da-daaa start. That bold dramatic start, called the Allegro, is meant to grab the listener and stir the senses. It is typically fast and energetic, introducing the theme of the piece.

 

On the other side of the Atlantic from Austria is Wall Street, where earnings season begins this very week. It too follows a strict structure, carefully choreographed. And similarly, it too will take our emotions, and our portfolios on a journey over the next five or so weeks. This week, our focus will be on the financial sector–our Allegro–if you like. JPMorgan Chase will take the conductor's baton and set the mood for the entire procession that follows. Do you think banks are boring? Think again. They are the masters of money! You know, the oil of all industries. Their health is paramount in ensuring that the economy is healthy. We will not only learn about their health, but also about what they are expecting in the quarters ahead. Will they be upbeat about prospects? We will also get a clue about the health of the sectors and clients they serve. Will real estate come back in the quarters ahead? How about IPOs and M&A? What are consumers buying with credit cards? We will learn about this and more in the days ahead as the banks set the stage for what is to come in the upcoming movements.

 

The second movement of a symphony is typically the Adagio or Andante. It is a slower, more introspective chapter where variations of the theme set in the first movement are explored. On Wall Street, we will hear from consumer staples, industrials, and materials. These sectors all explore the breadth of the economy. While industrials and materials are cyclical, that is they are subject to the health of the economy, consumer staples are non-cyclical and defensive. During this Adagio, we will learn more about companies like Caterpillar (industrials). How will tariffs impact its globally-diverse supply chain and customers? What about rare-earth elements and gold–hot topic, both? Last week, the President proposed a 50% tariff on Copper. What impact will that have on Freeport-McMoRan (materials)? It is the largest US-based Copper miner. It is also a Gold miner, and surely we would like to know about the prospects for those two base metals. One of the better-performing sectors year-to-date has been consumer staples. Why? Economic uncertainty in this on-again-off-again tariff world combined with a complacent Fed has gotten a few portfolio managers nervous about overall economic health. The products from this sector are gotta-haves. Think Colgate-Palmolive (toothpaste and soap), General Mills (Cheerios cereal), Brown-Forman (whiskey), Kroger (grocery stores), and Philip Morris International (tobacco). People buy these things even when the economy struggles.

 

You can see how that slower, Adagio movement will wind through and explore the inner workings of the economy right before our eyes. Listeners typically get bored through this movement and press the “next” button on their devices. If you do, you will miss some important information. But if you make it through, you will end up in the Scherzo, which is more upbeat, even dance-like. You may end up with a rhythmic minute. It is typically light and uplifting, more mood exploration is typical, but it is designed to get you ready for the final movement. On Wall Street, we get healthcare and consumer discretionary. Both have had a tough year to date, but within each there are vast differences in their core businesses. Healthcare services have had many ups and downs with the potential of a bit of staccato, almost like an up-and-down dance. Will United Healthcare, down by some -38% year-to-date, weather its troubles? What about GLP-1’s? Can dominant player Eli Lilli continue to dominate the space and keep the competition out?

 

Consumer discretionary stocks have struggled lately as well. This sector is vastly lagging the broader market, down slightly year to date. The sector, similar to healthcare, is a broad one with lots of variation amongst members, making for lots of movement changes, day to day. Can Nike regain the dominance it once had? More importantly, will its global supply chain be upended by tariffs? Will Home Depot be able to edge out Lowe’s and capture market share by keeping prices lower and eating added tariff costs? Amazon is also in this group, though it is vastly more complicated because of its various business lines including cloud, AI, bricks and mortar grocery (technically staples), e-commerce, hardware, etc. With all the companies in these sectors deeply connected to consumer sentiment, we will end this movement with elevated heart rates, which is a perfect set up for the final movement.

 

The final movement of a typical symphony is the Allego or Presto. This is the exciting finale which incorporates all other movements into a fast, emotional, and mostly-uplifting finish. On Wall Street, this last movement includes the technology, communications, utilities, and real estate sectors. I am sure that I don’t have to go into too much detail about technology and communications, which include all the companies that dominate the S&P500. Artificial Intelligence will be the flavor that dominates almost every earnings announcement here. Will Apple finally wake from its AI slumber with an acquisition? Will NVIDIA be able to leap the high, high bar set for its guidance? Can Meta justify the big employment package for AI rockstars to remain relevant in this competitive arena? Will Alphabet tell us more about how it is competing with Tesla in the robotaxi market? Netflix is technically in this sector but it makes its appearance during the Adagio. ☝️ Will Netflix continue to dominate the streaming space with subscriber growth? There are just too many companies in these two sectors to mention here, but there will certainly be fireworks. To be clear though, it won’t all be positive. The bars are extremely high, and there will be plenty of emotional, less flattering earnings announcements from the real estate sector. Will industrial REIT Prologis be affected by tariffs? Will Equity Residential continue to benefit from growing rents? Will Boston Properties announce that office real estate is poised for a comeback as rates are expected to ease later this year? Will mall operator Simon Properties give us a clue on the health of the consumer? Even mostly-boring utilities will be exciting as it has lately been linked to power-hungry AI. Will Constellation, Dominion, and Duke energy tell us more about how nuclear energy demand is so closely tied to AI infrastructure? 

 

I am hoping that you can see how this final movement will have lots of fast-paced ups and downs. Now, I know that I forced you to learn a bit about classical music compositions, and that might not be your thing, but you may know more about it than you think. Have you heard the live cannons in Tchaikovsky's 1812 Overture? I know you have. It is technically not a symphony, but it does feature those 16 live cannon shots and they certainly get your heart pumping. How about the up to 120 singers in Beethoven’s 9th Symphony singing “Freude, schöner Götterfunken,” in the last movement. I know you have heard that! 

 

This earnings season, like all others before, will follow a carefully choreographed order that will surely bring your emotions through highs and lows. Bars are set low as EPS growth is expected to be significantly lower than the past few seasons. But, as I reminded you last week, low bars are easy to get over, but misses can have painful results. We will indeed learn in the next 4 or so weeks if this symphony will end with those "beautiful spark of the gods” (translation from Ode to Joy), cannons, or Tchaikovsky’s Symphony No. 6 “Pathétique,” which has a haunting finale. Pay attention and don’t fall asleep in the second movement. Hate classical music? Sorry, you can just replace all of the above by listening to “Bohemian Rhapsody” (Queen), “Stairway To Heaven” (Led Zeppelin), or “A Day in the Life” (Beatles). They all follow the same pattern. Applause, applause, applause…

 

FRIDAY’S MARKEST

Stocks declined on Friday as traders finally gave up ignoring the barrage of negative tariff news that hit the markets throughout the week. Traders buckled up in preparation for this week’s big economic numbers and the start of earnings season.

 

NEXT UP

• No major releases today, but earnings are starting to trickle in and later this week we will get Consumer Price Index / CPI, Producer Price Index / PPI, Industrial Production, Retail Sales, housing numbers, and University of Michigan Sentiment. Download the attached earnings and economics calendars so you can be the first in line for the symphony.

DOWNLOAD MY DAILY CHARTBOOK HERE 📈

DOWNLOAD WEEKLY ECONOMIC CALENDAR HERE 📅

DOWNLOAD EARNINGS CALENDAR HERE 📅