RBC's Markets in Motion - TopPodcast.com

Earnings Wind Down, Stretched Positioning, Valuations With Less Room to Run Nov 11, 2024

Three big things you need to know: First, earnings season is winding down with a disappointing feel to us on the stats, though it’s admittedly not driving price action right now. Second, in our transcript reading, a mixed macro and consumer remained in focus, as companies began to highlight key policy issues they are watching post election. Third, positioning in US equity futures, for both the S&P 500 and Russell 2000, looks stretched. Valuations have some room to run, but not a ton.

What We've Been Talking About After The Election Nov 07, 2024

Today in the podcast, we run through three things in focus in our conversations following the US election. First, we review the tailwinds for US equities that we’ve been highlighting from a Trump win, along with some of the headwinds to watch out for. Second, we highlight why we think Small Caps have at least a little bit more room to run and what we’re watching to help us know when it’s time to fade the trade. Third, we review our thoughts on the old economy, value-oriented sectors that did well on Wednesday.

Higher Level Thoughts on the Outcome of the US Election Nov 05, 2024

We’ve recorded this on the day of the US Presidential Election, and that’s what we're focusing on today.

There are 7 big things you need to know: They focus on the set-up, the historical playbook, bottom-up policy implications per our analyst survey, our thoughts on positioning trades, one tailwind that will manifest regardless of what happens, tail risks, and our rundown of what we’ll be watching on election night and possibly the days beyond.

A Mildly Disappointing Reporting Season So Far, Election Thoughts Oct 28, 2024

Three big things you need to know: First, the early S&P 500 stats are now pointing to a mildly disappointing 3Q24 reporting season so far. Second, a mixed backdrop, the need to wait a bit longer for interest rate relief, and the need to get through the election were key themes in last week’s earnings calls. Third, the US election has been in focus in our recent meetings with US-based long-only investors, who we encourage to be ready for all outcomes.

Good Start for the Rotation Trade, Clogs in the Pipes, Election Muscle Memory Oct 21, 2024

Three big things you need to know today: First, the early earnings stats are mixed for the broader market but promising for the rotation trade. Second, company commentary continues to suggest the plumbing of the economy is in good shape, with a few clogs. Third, our examination of index, sector and industry performance and trends in polling and betting market averages suggest to us that several traditional Trump trades (specifically, Small Caps, Energy, Financials) have remained intact.

3Q24 Earnings Preview Oct 14, 2024

The big things you need to know: First, we’ve done some housekeeping on our S&P 500 EPS estimates for 2024 and 2025, resulting in very modest changes. Second, we highlight the two things we’re paying the most attention to in reporting season – specifically, qualitative color from companies on hot macro topics and whether mega cap Growth can maintain its earnings dominance. Third, we highlight what else jumps out from our high frequency indicators on sentiment and the US election.

September Analyst Survey Results, Changes To Our US Sector Views Oct 08, 2024

Two big things you need to know: First, globally our analysts are generally constructive on performance, valuations and interest rates, with Materials most in favor and Consumer Staples most out of favor across all of the questions we asked. Second, within the US we are reiterating our overweights on Financials and Materials, upgrading Health Care to overweight, and downgrading Utilities to market weight. Energy remains a tactical overweight but goes on downgrade watch.

Economic Tailwinds Return, Boosting Small Caps Oct 07, 2024

The big thing you need to know: Small Caps got a boost from the better-than-expected jobs report on Friday, reinforcing our belief that a return of economic tailwinds is the catalyst they need to take valuation and positioning to the next level.

Spotlight on the US Elections Oct 02, 2024

Three big things you need to know: First, our survey results, which are bottom-up in nature and driven by domestic policy views, imply that the event is relevant to US equity markets, but perhaps less so than some market participants may believe. For our US analysts, a Republican sweep was seen as the most bullish outcome, while a Democratic sweep was seen as the most bearish outcome, but the key thing to note is that the tilts were extremely mild. Second, some of the traditional Trump trades continue to emerge in policy assessments and sector views. Among our US analysts, Energy and Financials had some of the most bullish tilts in a Republican sweep scenario, and some of the most bearish tilts in a Democratic sweep scenario. Third, in terms of our own broader market call, we’ve viewed the elections as creating near-term uncertainty in the US equity market and the potential for some short-term choppiness, but the survey results add to our growing belief that the thing that may matter most for US equities (for 2024) is getting past the event so companies and investors know what they are dealing with.

Thoughts On The S&P 500 Following The Fed, Plus A Few Other Updates Sep 23, 2024

Two big things you need to know: First, valuations continue to look full for 2024 on the S&P 500, but our model argues for upside in 2025. Second, there’s a lot of little stuff to talk about right now. We run a few of the key updates on our high frequency indicators including those on the rotation trade, small caps, and the election.

Small Caps’ Good Day, US Election Policy Read Throughs Sep 16, 2024

Two big things you need to know: First, a few things (besides renewed optimism over a 50 bps cut) went right for Small Caps last week. Second, we highlight our current, top-down US equity market read throughs from the domestic policy platforms of the Harris and Trump campaigns. The longer-term signal their platforms are sending is more interesting to us than the noise around any shorter-term policy related sector trades.

Employment Uncertainty Growth, Election Uncertainty Persists Sep 09, 2024

Welcome to RBC’s Markets in Motion podcast, recorded September 9th, 2024. I’m Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets. Please listen to the end of this podcast for important disclaimers.

Three big things you need to know:

First, Friday’s jobs report added to investors’ uncertainty regarding the labor market, but the data point that concerned us from last week was the spike in Tech layoffs in the Challenger report.

Second, election uncertainty has persisted with policy getting greater attention from both sides. We run through our US equity market read throughs from Trump’s economic speech last week.

Third, in our discussion of other updates from our high frequency indicators, we review what we’re watching in terms of potential near-term downside levels for the S&P 500, sentiment, and the Semis trade.

If you’d like to hear more, here’s another 6 minutes. Now, let’s jump into the details.

Starting with Takeaway #1: Employment Uncertainty Has Grown After Friday’s Jobs Report, But The Spike In Tech Layoffs In The Challenger Report Spooked Us The Most Regarding Stocks

RBC’s economics team noted that while the report “doesn’t point to a sharp contraction in the labor market, it also gave no indications that the broader cooling trend – which is not welcomed by the Federal Reserve – has in any way run its course.” From our seat in US equity strategy, we generally agree with the idea that the jobs report is still consistent with cooling and normalization as opposed to an economy on the cusp of recession.
That being said, we were a little spooked by some of the details in the Challenger layoff report that came out earlier in the week. The overall level of layoffs moved up in August, but remained well below the spikes associated with past recessions, and was even a bit below the moves higher seen in 2023-2024 and 2015.
What caught our attention was the spike in layoffs for Technology companies which wasn’t as bad as those seen in late 2022 and early 2023, but otherwise rivals some of the worst spikes this industry has seen over time. This primarily worries us in regards to the Tech sector itself and the broader market by way of the rotation trade. Though layoff announcements moved up slightly in a few other industries, those were generally mild relative to history.

Moving on to Takeaway #2: Election Uncertainty Persists, With Policy Getting Greater Attention

We continue to see the US election as a key challenge that the US equity market will need to work through in coming months, due to the uncertainty that the event has injected into the outlook. We do usually see a pullback in the S&P 500 in September and October of Presidential election years, with a rebound afterwards.
Thinking about today specifically, a number of companies referred to this idea that the election has injected some uncertainty into the outlook in their recent earnings calls.
Meanwhile, Harris has pulled ahead of Trump in the PredictIt betting market and RCP polling average, but the race still looks quite close on these data sets, as well as in the polling for the swing states.
We do believe the stock market has been paying attention to the event given the alignment we’ve continued to see between S&P 500 performance and expectations that Trump will win in betting markets.
One of the primary things the stock market cares about regarding the election is domestic policy, and investors have been getting new information on the policy leanings of both Harris and Trump over the past few weeks. In our latest report, we’ve recapped our early thoughts on the stock market read throughs of Trump’s domestic policy agenda as described in his speech to the Economic Club of New York last week. We think it’s premature to put on any significant sector or industry trades based on the domestic policy ideas being by either candidate, discussed particularly since we expect Congress to be split leaving little room for major news laws. Nevertheless, a few things jumped out to us:
First, Trump’s linking of a lower corporate tax rate of 15% to domestic production was something we hadn’t heard before, and we confess that we aren’t entirely sure what companies would be eligible for the lower corporate tax rate Trump discussed after Thursday’s speech or how the S&P 500 would be impacted in terms of profitability. If we were to take down the effective tax rate by 6% in our S&P 500 earnings model for 2025, to approximate the Trump proposal, we estimate that our 2025 S&P 500 EPS forecast could rise by more than 7%. After Thursday’s speech, however, we no longer think that’s the right way to think about the math as we suspect different companies, industries, and sectors could be impacted differently.
Second, Thursday’s speech gave us a better sense of which sectors and industries we should be watching closely from a Trump perspective.
Industrials and Materials remain obvious ones to monitor given Trump’s attention to the manufacturing economy, rescinding unspent IRA money, and tariffs, which got a lot of attention in the speech.
Others include Energy - even though we knew this issue was in focus for Trump, we were still surprised by the emphasis on expanding production in his remarks.
Homebuilders - we found the comments he made on expanding housing affordability and supply interesting given the focus on the issue by Harris recently,
Tech/AI and Utilities - we found Trump’s comments on the US needing to dominate AI and the need for more electricity to make it happen noteworthy.
Health Care also jumped out to us, but because it was barely mentioned throughout the speech, suggesting to us that it’s not a high priority.
Similarly, even though Financials has tended to be viewed as a Trump trade, it is worth noting that there was also virtually no discussion of this sector that we can recall in his speech on Thursday, aside from the potential link to the broad desire for deregulation.

Tuesday’s debate provides an opportunity for investors to get more insights into both candidates’ domestic policy agendas, but only if the moderators choose to dig in there.

Wrapping up with Takeaway #3: What Else Jumps Out From Our High Frequency Indicators

The decline in the S&P 500 so far in September of 4.25% is right in line with the five-year average full month return for the index in September, and the full month September decline in the index in 2023.
If the September pullback in the S&P 500 continues, we’ll be keeping a close eye on the index around the 5,100 level, which would represent a 10% drawdown from the July high and decline in percentage terms similar to what was experienced in Fall 2023 . We see scope for further downside, or at least choppiness, in the near-term given the five big pressures we’ve been highlighting for US equities seasonality, sentiment, the election, the typical market volatility around rate cuts, and rotation. For now, we still think any further damage would be contained within a 10% garden variety pullback range. But if hard landing fears continue to escalate, the risk of a growth scare decline in the 14-20% range, similar to 2010, 2011, 2015-2016, and 2018, will also admittedly rise.
REITs, Utilities, Staples and Financials are outperforming the most within the S&P 500 so far in 3Q24, followed by Health Care. These represent classic defensive parts of the US equity market, along with a big pocket of cyclical value. Other than the fact that these are natural beneficiaries of the rotation out of mega cap Growth names, two things jump out to us about these sectors.
First, Financials is an area that has almost always outperformed in the 2nd half of Presidential election years within both Large Cap and Small cap.
Second, most of these classic defensives (ex REITs) tend to outperform following first Fed rate cuts.
We were surprised to see that investor sentiment and positioning got even more stretched last week. The four-week average for AAII net bulls rose to 21.5% (barely below the 1 standard deviation mark) after the weekly data point came in at 20.4% (page 30).
Lastly, we’re keeping an eye out for opportunities in some of the parts of the US equity market that are getting hit hard right now. One of these that we’re watching closely is the Semis & Semi Equipment industry. Despite the pain that’s been inflicted on this space, it still looks problematic on our industry work. Valuations for the median stock in this industry in the Russell 3000 remain elevated, and earnings revisions trends remain negative.

That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.

Back to Reality Sep 04, 2024

Two big things you need to know: First, as we return from the Labor Day holiday weekend in the US, we find that major challenges for US equities are still lurking. We remain confident in our 5,700 YE 2024 S&P 500 price target, but acknowledge the challenges that must be worked through. Second, other updates from our high frequency indicators keep us in the camp that believes the US economy is slowing but isn’t on the cusp of an outright downturn. Overall, we continue to take comfort in earnings and economic data.

Odds & Ends To End The Summer Aug 21, 2024

The big things you need to know: First, 2Q24 earnings season is ending up solid. With most reports in, we highlight a few of the most interesting charts in our deck on earnings right now. Second, other updates on our high frequency indicators were generally positive for US equities and mixed for the rotation trade. We end the summer of 2024 with increased conviction that August 5th was the low in the recent pullback, even if some choppiness seems likely to be there to greet us when we return in September, and feeling good about our 5,700 YE 2024 S&P 500 price target.

Pressure Release Aug 13, 2024

Three big things you need to know: First, last week’s price action relieved some pressures on the stock market, but didn’t solve its major problems. Second, earnings remain solid with no major deterioration in corporate tone. Third, we’d be more selective with value-oriented defensive sectors going forward.

Monitoring Earnings, The Rotation Trade, and The Pullback Jul 30, 2024

Three big things you need to know: First, earnings season has been fine so far, and what we’ve read has kept us in the “tired goldilocks” camp. Second, we run through the latest updates for the indicators we’re monitoring in the rotation trade. We are mindful of headfakes, but think the trade may still have some room to run in the short term. We also still think whether a durable multi-year leadership transition is underway remains to be seen. Third, individual investor sentiment took a big hit last week per the AAII survey, while US equity flows have remained strong, keeping us on guard for an end to the current pullback.

Sentiment, Earnings, Rotation, and the US Election Jul 22, 2024

Four big things you need to know: First, investor sentiment has gotten as extreme as it did last August and this past March. Second, earnings season is off to a solid start, but we are still looking for some additional evidence in support of the idea that we’re seeing a durable leadership shift rather than a short-term rotation trade. Third, we’ve been monitoring our other high frequency indicators for clues on the rotation trade. Some suggest the rotation trade has room to run but others are less clear. Fourth, we highlight what we’re watching in the equity market regarding the US election and our initial thoughts on how Biden’s decision to withdraw may impact US equities.

2Q24 Reporting Season Is A Key Test For The Rotation Trade Jul 16, 2024

Two big things you need to know: First, we see 2Q24 reporting season as a key test for the rotation trade that attempted to start up again last week. Second, we remain worried about a pullback in the S&P 500 given the latest developments on our sentiment and positioning work, but timing seems a bit more complicated due to last week’s CPI print and surge in optimism on Fed cuts.

Some of the Things We're Thinking About in US Equities as 2H24 Begins Jul 02, 2024

Three big things you need to know: First, we are lifting our YE 2024 S&P 500 price target to 5,700 from 5,300, which we would characterize as a nervous raise. Second, we think the risks of a short-term pullback in the S&P 500 are growing, similar to what occurred in April. Third, on positioning, we think it will be tough for the US equity market to see a sustainable leadership transition away from mega cap Growth until we are through the economic soft patch.

Steady C-Suite Confidence, What’s Baked in, Flows Argue for Rotation Jun 25, 2024

Three big things you need to know: First, the Duke CFO survey highlights how C-Suite confidence has remained steady, with monetary policy and automation in focus. Second, our new valuation stress test suggests the S&P 500 has been baking in optimistic views on inflation, interest rates, and the Fed. Third, recent funds flow trends point to a lingering desire for a shift in market leadership.

Gold – Some Caution Warranted Jun 21, 2024

RBC’s Markets in Motion is the weekly podcast from Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, highlighting her latest views on the US equity market. This week, we are excited to have Chris Louney, Commodity Strategist on RBC’s Global Commodity Strategy and MENA Research team, guest hosting this week’s episode while Lori is out.

Three big things you need to know: First, while gold prices have had a strong rally this year, having hit record highs last month, we remain cautious. We think that gold is overvalued from the perspective of a number of key macro drivers and that there are some unrealized vulnerabilities to the pillars of gold’s rally. While we are cautious, it’s more because we do not think gold should be at such high levels just yet. Second, while May and June have seen a less weak and more rangebound trend for gold-backed ETPs, we are not convinced that investors are beginning to follow through just yet. Investors sold their gold holdings as prices rallied, and we’ve yet to see a sustained return to buying. Third, central bank demand has been a key pillar to the gold rally but as China’s pause in purchasing showed, there are vulnerabilities. To be clear, we still think that central bank demand will continue to be strong, but there are reasons to be cautious on the volume at record prices and after such a sustained period of strength.

Mega Cap Growth Surges, As Small Caps Sink Jun 17, 2024

Three big things you need to know: First, the continued outperformance of mega cap Growth stocks has been logical, but still somewhat jarring to us. Second, Small Caps broke to clear new lows relative to Large Caps last week as risks piled up including a Fed that seems inclined to cut just once this year. We’d stay on the sidelines with Small Caps for now. Third, investor sentiment continues to concern us, and we’ve added consumer sentiment to our list of worries for the stock market following the Michigan survey miss. One offset is that the US may benefit from safe-haven seeking if flows to European equity funds deteriorate.

Special Edition - A Conversation on Concentration, Retail, Energy & Utilities Jun 06, 2024

Special Edition: This is a special edition of RBC’s Markets in Motion podcast, recorded on June 4th, 2024, from the RBC Capital Markets 2024 Global Energy, Power & Infrastructure Conference (EPIC). Lori is joined by two of her road warrior colleagues, Ben Fisher (Midwest Equity Sales, specializes in macro) and Amy Wu Silverman (RBC’s Equity Derivatives Strategist). The format this time is a bit different from the typical Markets in Motion podcast. Ben moderates a discussion with Lori and Amy about the big things you need to know from their recent conversations on the outlook for equities. Topics include stock market concentration and the potential catalysts for leadership rotation, the influence of retail trading, and views on the Energy and Utilities sectors.

Old Leadership Bounces Back With A Vengeance Jun 03, 2024

Two big things you need to know: First, we highlight how and why old leadership in the US equity market has returned with a vengeance and run through our latest thoughts on what might get the rotation trade going again. Second, several of the gauges of investor sentiment and equity market risk that we track are keeping us neutral on stocks through year-end for now, and tactically cautious.

Stuck In Neutral For Now May 29, 2024

The big things you need to know: First, Small Caps are retesting their relative low vs. Large Caps once again, as Fed rate cut optimism has faded once again. We remain neutral Small vs. Large for now. Second, investor sentiment has almost returned to the highs in place to start the year (as well as the summer of 2023) on the AAII survey, reinforcing our neutral stance on the broader US equity market for now. Third, our S&P 500 valuation model continues to suggest that the broader US equity market is fairly valued, with some modest downside risk if current inflation, interest rate, and Fed assumptions end up being too rosy. For a material move higher in the market by year-end to be justified on the math, we think investors will need to start focusing on the outlook for 2025, where visibility still seems a bit limited.

Right Back Where We Started From May 21, 2024

The big things you need to know: Three big things you need to know: First, Tech has bounced back on performance and earnings revisions but valuations remain a problem. Second, valuations more broadly have started to look less appealing. Third, other updates in our high frequency indicators highlight how pendulums have swung on a few different fronts (namely investor sentiment, election stats, and funds flows).

Earnings Ending Up Fine with a Twist, Bulls Bounce Back May 14, 2024

The big things you need to know: First, reporting season has ended up looking just fine on the stats, with one twist at the end. Second, we update our rundown of key themes on earnings calls. Third, net bulls on the AAII survey bounced back last week as 10-year yields decoupled from their 2023 spike, hopes for Fed cuts returned, and flows to US equity funds improved.

Updates on Reporting Season, Sentiment, Small Caps May 07, 2024

The big things you need to know: Three big things you need to know: First, after a weak start to 1Q24 reporting season, it has settled into a groove on the stats. Second, we review our thoughts on key themes on company earnings calls so far. Third, we highlight what’s jumping out on our high frequency indicators. This includes our main sentiment indicator (which we still think hasn’t fallen enough) and our rundown of the key headwinds and tailwinds for Small Caps (which both weakened last week).

Analyst Survey Results Point To Optimism & Rotation, US Sector Call Changes Apr 24, 2024

The big things you need to know: First, we’ve just completed our quarterly survey of RBC’s equity analysts around the globe and found that optimism on performance persists for most sectors and coverage regions, despite the challenges associated with higher interest rates. Second, with a fresh set of survey results in hand we are making three changes to our sector recommendations. Within the US (and S&P 500 specifically) we are upgrading Materials to overweight, downgrading Health Care to market weight, and downgrading REITs to underweight.

Sentiment, Companies Beating Consensus, and Growth Take a Hit Apr 23, 2024

The big things you need to know: First, investor sentiment has taken a bit of a hit, but it’s too early to say the pullback is over. Second, while we continue to expect the pullback to bottom out in the 5-10% range vs. recent highs, we’ve taken a look at S&P 500 performance around recent wars to gauge potential downside risks if we are wrong in that assumption. Third, it’s been a rough start to 1Q reporting season as companies beating consensus EPS forecasts have been underperforming significantly in terms of immediate price performance. Fourth, we’ve been surprised to see Large Cap Growth underperforming given the recent move up in 10-year yields, and run through the reasons (besides crowding and overvaluation) that we think this is happening.

Seven Things We’re Thinking About Right Now Apr 16, 2024

The big things you need to know: First, geopolitical concerns are spiking at a time when stocks already seemed due for a pullback. Second, the rotation trade has just gotten a lot more complicated. Third, companies have been keeping expectations low on earnings. Fourth, our valuation modeling suggests some modest downside risk to the stock market if we don’t get cuts, and a more significant hit if we get more hikes. Fifth, Small Caps may be stuck in a holding pattern for a while. Sixth, Biden has closed the gap with Trump in betting markets. Seventh, US equity flows have fizzled.

Sticking With Energy, Swing State Shifts Apr 10, 2024

Two big things you need to know: First, the Energy sector still looks attractive to us, even after its big move in March, and we remain overweight. Second, Trump has lost some momentum in swing state polling, challenging a key assumption of many non-US investors.

Spring Cleaning on Our 2024 S&P 500 Forecasts Mar 28, 2024

Three big things you need to know today: First, we lift our YE 2024 S&P 500 price target to 5,300 (from 5,150). The most constructive model in our tool kit indicates upside to ~5,400, which represents our bull case if our base case is too conservative. Second, we continue to see some conflicting cross currents for stocks. Among the five models that we use, our economic, valuation, and cross-asset work are sending the most constructive signals, while our sentiment and politics work are less enthusiastic. Third, we lift our 2024 S&P 500 EPS forecast to $237 (from $234), which remains slightly below the bottom-up consensus.

Lessons From The R2000/S&P 600 Debate, Institutional Sentiment Rebounds Mar 26, 2024

Two big things you need to know today: First, our work on the R2000 relative to the S&P 600 (sparked by Small Cap PM concerns about low quality) adds to our belief that the US came close to recession in 2022. Second, CFTC buyside positioning in US equity futures rebounded last week ahead of the Fed, highlighting increased risk of a melt-up in the broader US equity market.

Energy Thoughts, Large Caps’ EPS Advantage, Sentiment Slips More Mar 20, 2024

Three big things you need to know: First, Energy has been a top S&P 500 sector since January. We like its attractive valuations, improving funds flows, and role as an inflation hedge in our overweights. Second, Large Caps are starting to look a little better than Small Caps on a few of the earnings-related metrics that we track, suggesting to us that Small Caps’ sluggish performance of late isn’t all about Fed and inflation fears. Third, sentiment continued to slip on one of our main sentiment models from elevated levels.

Sentiment Slips, GDP Views Continue To Improve, Biden’s Wish List Mar 12, 2024

Three big things you need to know: First, one of our key sentiment indicators has started to retreat after hitting extreme levels, which has coincided with a stealth rotation in leadership. Second, we’re starting to see a more broad-based improvement in US GDP expectations, which we see as supportive of continued rotation in stock market leadership. Third, Biden put out his wish list in Thursday’s State of the Union, giving equity investors a taste of his goals in a potential 2nd term.

Commodities – The 2024 Balancing Act Feb 22, 2024

RBC’s Markets in Motion is the weekly podcast from Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, highlighting her latest views on the US equity market. This week, we are excited to have Chris Louney, Commodity Strategist on RBC’s Global Commodity Strategy and MENA Research team, guest hosting this week’s episode while Lori is on vacation.

Three big things you need to know: First, in our most recent analysis of global commodity investor flows, we have observed that total commodity investor AUM has started off the year on a weak note. Commodity-linked exchange traded products have continued to decline, led by gold, and commodity index AUM also weakened last month. This has set 2024 up for quite the balancing act, but we remain hopeful.

Second, with gold playing such an outsized role in the weakness dominating commodity AUM, it may be surprising that gold prices have actually held up quite well. We have continued to call out gold’s price resilience, especially in the context of investors having remained on the sidelines. This compared to the gold-positive narrative of eventual rate cuts has left gold itself facing quite the balancing act.

Third, a balancing act that has for the most part not played out in a commodity’s favor so far this year is US natural gas. It has touched lows recently amid weak weather-linked demand, buoyant supplies to date, and general bearish sentiment. We have described it as a commodity that has fallen a bit too far, seemingly waiting for a catalyst, but are recent headlines enough?

Reporting Season Stats Steady, Consumer Color, Top Charts In Our EU/ UK Meetings Feb 13, 2024

Three big things you need to know: First, 4Q23 reporting season stats are similar to what we’ve described over the past few weeks with fewer earnings beats than last quarter, muted stock price reactions following earnings prints, and further compression in the forecasted growth rate embedded in consensus earnings expectations for 2024. Second, in our review of last week’s S&P 500 earnings calls the tone was mixed on the macro, negative on China, and had a positive tilt on the consumer.

Third, two of the charts in focus in our Europe/UK meetings last week included our chart showing how the earnings dominance of the top 7 names in the S&P 500 is fading (which may help spark leadership rotation down the road) and our chart showing how net bullishness on the AAII survey may be heading for a 2-standard deviation event (delaying the pullback we have been anticipating).

2024 EPS Forecasts Shrink, Stretched Sentiment, Strong Data Feb 05, 2024

Three big things you

need to know: First, with reporting season almost halfway done, bottom-up consensus expectations for EPS growth in 2024 have shrunk to 9% from 11% – a combination of better-than-expected results for 2023 and a modest dampening of enthusiasm for 2024’s outlook. Second, a murky macro backdrop, elevated costs, and China challenges have been in focus in recent earnings calls along with a better monetary policy outlook. Third, in our high frequency indicators, things that caught our attention included the worsening in the sentiment backdrop for stocks last week and mostly positive data regarding the health of the economy and labor market.

A Mixed Bag of Earnings So Far, Latest Sentiment & Valuation Developments Jan 30, 2024

Three big things you need to know: First, we’d describe 4Q23 reporting season as a mixed bag so far. Second, in our transcript review we were struck by the wide range of views on the macro backdrop and outlook as well as the continued emphasis on the challenges associated with inflation and higher costs. Third, things that jumped out in our high frequency indicators last week included some modest improvements on some of our sentiment and valuation models. Plus, one bonus thought on the US Presidential Election.

EPS Concentration, Reporting Season Takeaways, Another Consumer Surprise Jan 24, 2024

Three big things you need to know: First, EPS growth in the top 7 names in the S&P 500 is expected to continue outpacing the rest of the index in 2024 and 2025, but to a lesser degree than we saw in 2023. Second, companies have tried to strike an optimistic tone in the first batch of 4Q23 earnings calls, with consumer resilience, macro risks, and the theme of normalization emphasized. Third, the thing that jumped out to us the most in our high frequency indicators last week was the strong reading in University of Michigan consumer sentiment, which stock market performance has been closely correlated with post COVID.

Navigating Sectors Globally In 2024 Jan 17, 2024

Last week, ahead of earnings, we updated our thoughts on sectors for 2024 for both the US as well as other geographical regions under RBC’s coverage, Europe, Canada, and Australia. The work was based on our own top-down quantitative analysis on earnings revisions, valuations, and macro fundamentals, as well as the results of a survey that we conducted of RBC’s industry analysts in late December and early January.

Three big things you need to know: First, across the globe most of our analysts are optimistic on performance in the year ahead, with favorable views on the impact of potentially lower interest rates and, to a lesser degree, favorable views on valuations. Second, in the US, the only region where we do formal strategy sector recommendations, we remain overweight Financials, Energy, and Health Care. We downgraded Tech to market weight, upgraded Consumer Discretionary to market weight, and upgraded Utilities to overweight. Third, in Europe, Canada, and Australia our analysts’ top sectors according to the survey varied, but Utilities was among the top sectors in the eyes of our analysts in each.

The Top 10 Things We're Thinking About in US Equities Heading Into 2024 Jan 12, 2024

We've updated our thoughts on the 2024 outlook for the US equity market, focusing on the top 10 things we’re thinking about as the new year gets underway. The biggest things you need to know: First, in December we became concerned about the possibility of a near-term pullback in the US equity market given deterioration in our sentiment work, and that remains the case today. Second, despite these near-term concerns, we remain constructive on the S&P 500 for the full year and recently revised up our YE 2024 S&P 500 price target to 5,150 from 5,000. Third, we see a mix of tailwinds and headwinds for US equities in the year ahead. Tailwinds include valuations that can stay higher than many investors realize. Headwinds include highly bullish sentiment, expectations for a sluggish economy, and uncertainty around the 2024 Presidential election. Fourth, we continue to see a number of problems for the Large Cap Growth trade and we give an edge to Value and Small Caps in the year ahead. But for a rotation into Value and Small Caps to be sustainable, US economic expectations need to improve.

Valuations Ending 2023 At Reasonable Levels, But Pullback Risks Have Grown Dec 21, 2023

Today in the podcast, our last of 2023, two big things you need to know: First, with just a few trading days left to go in 2023, the S&P 500 is close to a level that our valuation model has been suggesting is a reasonable one. Second, while we remain constructive on the year ahead, several charts that we track regularly are starting to suggest that the rally in the S&P 500 is due for a pause.

Inbound Questions On Small Caps; Investor Sentiment Getting Too Enthusiastic Dec 06, 2023

Today in the podcast, three big things you need to know: First, similar to the S&P 500, R2000 returns tend to be positive but modest in Presidential election years. Second, the valuation appeal of Small Caps runs deep and exists within both Growth and Value using both equal weighted and market cap weighted P/E’s. But Small Caps’ valuation appeal has only recently emerged on equal weighted P/E’s, helping explain why Small Caps have had a difficult 2023. Third, investor sentiment is on the cusp of looking overly enthusiastic again on the weekly AAII survey, restraining our enthusiasm for the US equity market in the near-term.

The Top 10 Things We're Thinking About in US Equities Heading Into 2024 Nov 27, 2023

Today in the podcast, our initial 2024 outlook. Our year-end 2024 S&P 500 price target is 5,000, for a 10% gain. Today the podcast will work a little bit differently, as we’re running through the top 10 things we’re thinking about in US equities as the new year comes into view. Most of these focus on the math that gets us to 5,000.

Potentially Peaking Yields, Small Caps, Bearish Extreme in Sentiment Nov 07, 2023

Three big things you need to know today: First, Growth sectors are typically the biggest beneficiaries of declining 10-year Treasury yields. This analysis was in focus in our meetings last week where investors were keen to explore what to own if yields have peaked. Second, Small Caps, where balance sheet concerns have overshadowed attractive valuations, were also in focus in our meetings last week. Friday’s unemployment report also provided another reason to be taking a look at Small Caps now. Third, there were a lot of interesting updates in our high-frequency indicators last week, with the most important one being that the deterioration in US equity investor sentiment finally has started to look too extreme. The stock market has had a strong start to November, and the move seems deserved in light of what we’re seeing in most, though admittedly not all, of our sentiment indicators.

3Q23 Earnings Halftime Report Oct 30, 2023

Today in the podcast, we take a deep dive into the stats and commentary for 3Q23 reporting season, as of late last week with 45% of S&P 500 results in. Three big things you need to know: First, the S&P 500 stats simply aren’t strong enough to get the US equity market out of its recent malaise. Second, Small Cap trends are pretty similar to those in Large Cap, which is good for Small Caps because Large Caps no longer have an EPS advantage. Third, in our transcript reading the overarching theme so far is one of bending, not breaking, but the pessimistic tone is striking.

Still In A Spooky Place Oct 24, 2023

Today in

the podcast, we take a deep dive into the outlook for the US equity market from

the S&P 500 all the way down to Small Caps. Three big things you need to

know: First, we are sticking with our YE2023 S&P 500 price target of 4,250.

Though upside risks remain, downside risks have grown, the outlook has become

cloudier and we don’t think the pause in the S&P 500 rally that we called

for in early August is done yet. Second, we continue to believe that Large Cap

Growth is in need of a tactical correction, but we also acknowledge its

longer-term fundamental appeal which is why we think the leadership transition

has been so tough. Third, Small Caps remain intriguing from a valuation and

earnings perspective, but have been dragged down by balance sheet concerns,

rising bond yields, and lingering economic angst.

Solid Start To Reporting Season Despite Macro Headwinds Oct 17, 2023

Three big things you need to know today: First, we are lifting our S&P 500 EPS forecasts to $223 (up from $220) for 2023 and to $232 (up from $229) for 2024. Second, 3Q23 reporting season is off to a good start in terms of stock price reactions, even though EPS revisions have turned slightly negative and company commentary among the early reporters suggests that the uncertain macro is taking a toll. Third, other things that jump out from our high frequency indicators include an improvement in equity investor sentiment last week and the return of outflows from US equity funds.

Shutting Down the Shutdown, CFO Confidence Rises, Energy Revisions Near Peak Oct 02, 2023

Today in the podcast, three big things you need to know: First, Congress reached a deal to avert a government shutdown, for now, but we aren’t convinced this is the end of the current period of equity market weakness, as our main sentiment indicator still has room to fall. Second, CFO economic confidence rose in the latest Duke survey despite heightened concerns about monetary policy. Third, Energy revisions trends continue to improve but are getting close to historical highs. That’s a negative data point for the broader market, but some of the other updates from our high-frequency indicators admittedly lend more support to US equities.

Perspective on the Shutdown, Growth Trade, Sentiment & Utilities Sep 26, 2023

Today in the podcast, three big things you need to know: First, the stock market tends to experience turbulence heading into extended government shutdowns, but the S&P 500 has already done more than half the damage typically seen in those episodes and rebounds that follow tend to be powerful. Second, we view last week’s Fed meeting as a mixed bag for Growth stocks – negative short term but positive long term. Third, things that jump out from our high frequency indicators include continued erosion in investor bullishness, Trump pulling ahead of Biden in the polls, and strong outperformance by Utilities this month.

Monitoring Misery, Industrials Insights, US Inflows Return Sep 19, 2023

Today in the podcast, three big things you need to know: First, the Misery Index (inflation plus unemployment) has fallen sharply since last summer, helping explain the surprisingly strong move in the S&P 500 this year. Second, deleveraging was one key theme that jumped out to us from RBC’s Industrials conference last week. Third, other things that jumped out from our high frequency indicators last week include the recent improvement in bottom-up 2023 S&P 500 EPS forecasts and the return of US equity fund inflows driven by passive funds.

Why We're Sticking With Energy, The Nuances We See In Industrials Sep 12, 2023

Today in the podcast, our thoughts on two sectors that are important to the Cyclical/Value trade. Two big things you need to know. First, Energy still looks interesting on our models despite strong outperformance as summer came to an end. Second, we remain market weight Industrials, but find its been one of the more interesting sectors to discuss in meetings, as we see pluses and minuses for the sector that may not be fully understood.

AI Leadership Bounces Back, But Tactical Problems With The Growth Trade Remain Sep 07, 2023

Today in the podcast, two big things you need to know: First, AI leadership bounced back as the summer came to a close, but tactical problems with the Growth trade remain. Second, things that jumped out in our high frequency indicators last week included improving EPS revisions in Energy and Financials and an improvement in 2024 GDP forecasts, both of which support a transition in stock market leadership back to Cyclicals and Value.

Historical Election Playbook, Tactical Problems With Growth Persist Aug 29, 2023

Today in the podcast, three big things you need to know: First, historically, the US equity market tends to have a weak start in Presidential election years before rallying back ahead of the event, while trends tend to turn choppy again in the months around the event itself. 2024 could be different given the unusual circumstances in the upcoming race, but the history is still worth a quick look back. Second, while last week’s mega cap Tech earnings were generally viewed as strong, it didn’t change the fact that the Large Cap Growth trade has tactical problems (i.e., overvaluation, stretched positioning) that need to be resolved. Third, developments in our high frequency indicators were mixed for equities this past week, with improvements in earnings revisions trends and individual investor sentiment, but continued deterioration in trends for US equity funds flows. Overall, we remain concerned that the “breather” in the US equity markets that’s been underway hasn’t fully played out yet, but also consider ourselves to be more neutral than bearish on stocks from here.

Winding Down 2Q23 Reporting Season Aug 11, 2023

Today in the podcast, our thoughts on 2Q23 reporting season as it winds down for the S&P 500. Three big things you need to know: First, the overall stats have been decent, with some clear soft spots. Reporting season has been fine in our view but not good enough to fend off a bit of choppiness in the equity market. Second, Energy stands out positively at the sector level, along with Health Care. Third, we are saying goodbye to 2Q23 reporting season feeling as though equity investors are in a bit of an information vacuum – which seems likely to contribute to choppiness in US equity markets for the time being.

Due For A Pause Aug 08, 2023

Today in the podcast, an updated overview on our market call. Three big things you need to know: First, we’ve tweaked our S&P 500 EPS forecasts up modestly by $1-2 to $220 for 2023 and $229 for 2024, while leaving our YE 2023E S&P 500 price target of 4,250 unchanged. While one of our models highlights potential upside to ~4,800, and we think the gains in the index so far in 2023 have been deserved, we have become concerned that the rally in the S&P 500 is due for a pause in the months ahead. Second, we continue to see tactical challenges for the Growth trade, though we continue to like Growth over Value longer term. Third, Small Caps continue to look more appealing on our work overall than Large Caps, and we remain comfortable adding exposure there despite near-term risks to market direction broadly.

2Q23 Halftime Report Aug 02, 2023

Today in the podcast, we take a deep dive into the stats and commentary for 2Q23 reporting season, based on data through July 28th when 51% of S&P 500 results were in. Three big things you need to know: First, the stats have improved since our last update and we’re now on track for a more solid reporting season. Second, in terms of the sectors that are shining, Energy and Materials continue to rank highly in terms of stock price reactions to EPS beats, but Tech is also standing out positively on some stats. Third, in terms of commentary, the level of conversation around prior headwinds like inflation continues to dissipate, while topics like AI, inventory destocking, and normalization have been in focus. In the ongoing discussion of outlooks and current conditions, commentary has been mixed though consumers are still described as resilient.

Performance Under Pressure, Complicated Cross Currents Jul 25, 2023

Two big things you need to know today: First, actively managed long-only funds are underperforming their benchmarks for the year in most of the US categories we are tracking, with Small Cap Value emerging as a bright spot. Second, the cross currents for US equities are getting more complicated based on our high frequency indicators. We discuss negatives (sentiment, flows, valuations vs. Europe) and positives (better economic expectations, and the broadening of leadership) that we see.

Earnings Preview; Recovery Signals Jul 18, 2023

Today in the podcast, three big things you need to know: First, late last week we lifted our 2023 and 2024 S&P 500 EPS forecasts to $219 and $227, respectively. Second, the rebound in consumer sentiment that’s underway explains a lot about the stock market this year – both have been recovering off recession-like conditions since last year. Third, some of the things that jump out from our high frequency indicators currently are that investor sentiment continues to creep towards overbought territory, and low quality factors have started to perk up within Large Cap. Both speak to the idea that the US equity market is in the midst of one big recovery trade this year.

Our Bottom-Up, Global View of Sectors; Getting More Comfortable With Cyclicals Jul 13, 2023

Today in the podcast, an update on our outlook for sectors within the US, and some thoughts on sectors from a global perspective based on the results of our latest RBC analyst survey which now includes our teams from Europe, Canada, and Australia in addition to those in the US. Five big things you need to know: First, across the globe, RBC equity analysts are most constructive on Health Care and are least constructive on Consumer Staples. Second, RBC analysts are most constructive on Europe in terms of their performance outlooks, but there is some important nuance to their regional views. Third, looking at the US specifically, our analysts are most constructive on the performance outlooks for Health Care, Energy and Financials, and are least constructive on the performance outlooks for Consumer Discretionary, Consumer Staples, and Utilities. Fourth, in terms of our own US Equity Strategy sector recommendations, we have made two changes, lifting Financials to overweight from market weight and lowering utilities from overweight to market weight. Fifth, cyclicals also stand out in our survey and quant work on Europe.

New Topics; Monitoring Shifts in Sentiment, Politics, & Flows; Russia Thoughts Jun 26, 2023

This week the podcast is back to tackling hot topics and the most interesting things that crossed our desk last week. Three big things you need to know: First, corporate confidence, capex, and balance sheets were all new topics in focus in our investor meetings last week. Second, things that jumped out in our high frequency indicators included one of our main sentiment indicators starting to look more stretched, stabilization in Biden’s polling numbers, and strengthening in US equity funds flows – which collectively illustrate how the near-term outlook for the US equity market has gotten a bit murkier. Third, we highlight our initial thoughts on the weekend’s developments in Russia from a US equity market perspective.

Our Top Five Charts of 1H23 Jun 21, 2023

This week the podcast is a little different. With the mid-point of the year coming up, we’re revisiting the charts we discussed the most, and that resonated the most, in our meetings with investors in the first half of 2023. Although the S&P 500 has now pulled ahead of our recently revised year-end 2023 S&P 500 price target of 4,250, we’ve been north of the consensus tracked by Bloomberg on a median basis even before we raised it from 4,100 several weeks ago. For several months, the investors we’ve met with have generally assigned us to the bullish camp given what they’ve described as a more constructive view of the stock market on our part relative to other voices. We’ve joked that we’ve felt more neutral than bullish, but agree that we aren’t part of the bearish camp. Our top charts, which we discuss in today’s podcast, help illustrate why we’ve had this mindset. As for our market call today, most of our top charts are telling us the rally still has more room left in it, though one (which is sentiment based) requires close monitoring as it may soon signal that the rally has gone too far.

Sentiment and Small Caps Join The Recovery Jun 14, 2023

Three big things you need to know today. First, we continue to see expectations for a 2024 economic recovery embedded in GDP forecasts, and a healing process in earnings expectations is also underway – something we’ve been writing about a lot recently. Second, sentiment is embarking on its own recovery, with net bullishness returning to the AAII investor survey. Third, Small Caps appear to be getting their own recovery started, with a gain of more than 6.6% so far in June through Friday’s close, well in excess of the S&P 500’s 2.8% gain. Passive inflows have helped fuel the rebound, but we think the move is justified and remain overweight Small Caps relative to Large Caps.

Concentration & Narrow Leadership Likely More Noise Than Signal Jun 06, 2023

Today in the podcast, three big things you need to know: First, we looked at S&P 500 performance when market cap concentration in the biggest names has been high and in the 12-month period after fewer than 10% of stocks have been making new highs. Neither suggests concentration and narrow leadership are automatic sell signals. Second, Nasdaq valuations look stretched, but unlike the Tech bubble S&P 500 and Russell 2000 are well below recent peaks. Third, other things that jumped out from our indicators last week, which are constructive for stocks, include the strengthening earnings recovery, the continuation of favorable political tailwinds, and better trends in Small Caps.

US Equity Mkt Outlook Update Pt 2: Views On US/Non-US, Growth/Value & Small Cap Jun 01, 2023

Today in the podcast, part 2 of our US equity market outlook update, we discuss our views on higher level positioning trades. Three big things you need to know: First, we think the case against US equities relative to non-US equities has been overstated. Second, we think the risk of a pause in Large Cap Growth leadership has grown, even though we think this part of the market has outperformed for good reasons. Third, we think Small Caps are at an attractive entry point for patient investors.

US Equity Market Outlook Update Pt 1 - Thoughts On Our Revised S&P 500 Targets May 31, 2023

Today in the podcast, part 1 of our US equity market outlook update, we discuss our revised S&P 500 forecasts and general thoughts on our broader US equity market call. Two big things you need to know: First, we are lifting our YE 2023 S&P 500 price target from 4,100 to 4,250, which represents our base case. The range of outcomes in our modeling spans ~3,800 (our bear case) to ~4,600 (our bull case). Second, we are lifting our 2023 S&P 500 EPS forecast to $213 from $200 and are introducing our 2024 EPS forecast of $223.

Stay tuned for part 2 of our outlook update, which will dig into our thoughts on US vs. non-US equities, Growth vs. Value, and Small Cap.

A Deep Dive into 1945; Recovery Expectations Persist May 23, 2023

Two big things you need to know from today's podcast: First, we took a closer look at stock market performance and economic data around the recession of 1945, the only time since the Great Depression that the stock market didn’t fall as a recession took hold. We continue to think that this period provides useful lessons for how to think about the current macro backdrop for US equities and helps to explain the resiliency of the S&P 500 this year. Second, the theme of recovery continues to jump out to us in a number of the higher frequency stats that we’ve been tracking, adding to our belief that the recent resiliency in the US equity market has been justified.

1Q23 Earnings Season Report Card – Recovery, Resilience, Balance May 09, 2023

Today in the podcast, we run through our takeaways from 1Q23 reporting season. Two big things you need to know: First, recovery remains a key theme permeating the S&P 500 earnings stats we’ve been tracking, helping explain the resiliency of the S&P 500 of late. Second, the tone in S&P 500 earnings calls has generally been balanced in terms of the discussion of recent trends, the state of the consumer, outlooks, and inflation/pricing, while commentary on China has been mixed.

Debt Ceiling Drama Returns May 03, 2023

This week in the podcast, we’re focusing on the debt ceiling. Two big things you need to know: First, we see debt ceiling drama as a contributor to choppiness in US equity markets later this year, though we ultimately expect a deal. This was a hot topic in our meetings with UK investors last week. Second, we see Health Care as one of the most vulnerable sectors in the short term but would be buyers on weakness.

Decent Start To 1Q23 Reporting Season In The Stats & Commentary Apr 25, 2023

Today in the podcast, thoughts on 1Q23 reporting season which got underway last week. Two big things you need to know. First, 1Q23 reporting season has gotten off to a decent start. We review what jumps out to us on the stats so far. Second, the tone in company commentary on earnings calls has been balanced so far. We run through key themes in our reading from last week.

Stocks Have Ignored A Recession Before, Inflation Discussions Fade Apr 18, 2023

Today in the podcast, we tackle hot topics that crossed our desk last week. Three big things you need to know: First, some US equity investors have been frustrated that the stock market seems to be ignoring an upcoming recession, but it’s happened once before. Second, we are looking forward to an earnings season dominated by new hot topics, as the discussion about inflation and its underlying sources has begun to fade in company commentary. Third, a few other things that jumped out from our high frequency indicators last week are all more tactical in nature - elevated Nasdaq futures positioning, stabilization in Banks, better earnings revisions trends for Growth than Value, and the weakening rotation into non-US equities.

Latest Analyst Survey Results; Staying Overweight Utilities, HC, Energy & Tech Apr 12, 2023

Today in the podcast we’re talking sectors, following the release of the results of our latest RBC analyst survey which we blend with our own top-down strategy tools to arrive at our sector recommendations.

Three big things you need to know:

First, in our latest survey, taken in late March and early-April 2023, RBC’s US equity analysts were a little north of neutral in their outlooks for performance over the next 6-12 months.
Second, on the performance outlook, our analysts were most constructive on Utilities and Health Care, followed by Energy and Tech, with the weakest outlooks for Consumer Staples, Industrials, and Consumer Discretionary.
Third, the combination of our analysts’ latest views, our ESG Strategy team’s sector scorecard, and our own macro tools keep us overweight Utilities, Health Care, Energy, and Tech, and underweight Consumer Staples and Consumer Discretionary. We have also downgraded Financials to market weight.

CFO Confidence, Bond Market Volatility Eases, Holding Patterns in Key Trades Apr 04, 2023

This week in the podcast, we run through the most interesting things that crossed our desk last week which felt like one in which the equity community collectively exhaled. Two big things you need to know:

First, according to the latest Duke CFO survey, the C suite was were becoming more optimistic before SVB and was looking ahead of 2024 as a recovery year, while expectations for sources of inflation were dimming.
Second, things that jumped out from our high-frequency indicators last week include the decline in bond market volatility off highs consistent with past bottoms in the stock market and the stabilization of performance for banks and small caps, which suggest to us that sentiment may be starting to heal. Both are good signals for the stock market.

Tech Valuations, Sentiment Update, Small Caps At An Important Crossroads Mar 29, 2023

Today in the podcast, we have updated thoughts on sectors, sentiment, and small caps. Three big things you need to know: First, S&P 500 Tech sector valuations have room to run, while EPS and revenue revisions have turned slightly positive – supporting our continued overweight on the sector. Second, the body of our sentiment work continues to suggest fear has been approaching potential peak levels, but falls short of providing US equity investors with an all-clear. Third, other things that jump out from our high frequency indicators include how economic and earnings forecasts continue to anticipate a 2024 recovery, the return of high quality leadership, and how Small Cap performance relative to Large Cap is at an important crossroads.

Feeling Fine About Financials Mar 07, 2023

Welcome to RBC’s Markets in Motion podcast, recorded March 6th, 2023. I’m Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets. Please listen to the end of this podcast for important disclaimers.

Ahead of RBC’s Financial Services conference this week, today in the podcast we’re digging into our thoughts on the Financials sector, which we remain overweight. Three big things you need to know: First, Financials has been one of the best performing sectors over the past 6 months. Second, we think the sector is an attractively valued recovery play with a positive shareholder return profile, which history suggests should benefit from a Fed pause. Third, near-term challenges for the sector, and longer-term risks to our view, include the earnings forecast downgrade cycle the sector is in the midst of and the moderation in inflation that our economists continue to anticipate.

If you’d like to hear more, here’s another five minutes. While you’re waiting, a quick reminder that you can subscribe to this podcast on Apple, Spotify, and other major platforms. Now, the details.

2023 US Equity Market Outlook Update (Still Traveling Along A Bumpy Road) Mar 01, 2023

Today in the podcast, a refresh of our 2023 outlook. The three big things you need to know: First, we’re sticking with our 4,100 YE 2023 S&P 500 target. We continue to view 2023 as another year of messy post-crisis normalization, similar to the 2010-2011 and 2002-2003 periods. Second, we see a relatively balanced risk/reward between Growth and Value for the balance of the year, though Growth is likely to bear the brunt of renewed inflation/Fed fears in the very near-term. Third, we continue to prefer Small Caps to Large Caps, though we admit that the setup for Small Caps is less compelling than it was last July when we turned overweight Small Caps.

Debt Ceiling Drama, More Mixed Earnings Messages, Sentiment Rebound Feb 22, 2023

This week in the podcast, three big things you need to know: First, we see the drama in DC over the debt ceiling as a potential risk to keep an eye on for US equities later this year. Second, mixed messages persisted in last week’s earnings calls, with a slightly more positive tone than the prior week. Third, the rebound underway in investor sentiment, which has helped stocks stay resilient, still appears to be middle innings.

Low Quality, Muddled Macro Messages, 2023 EPS Softening vs. 2024 Recovery Feb 14, 2023

This week in the podcast, we reflect on the most interesting question we received last week, and our latest thoughts on earnings. Three big things you need to know today: First, low quality leadership has returned, something that’s normal after recession lows have been put in. Second, macro themes were muddled in last week’s S&P 500 earnings calls helping explain why the rally has stumbled a bit. Third, earnings related data points continue to highlight near-term softening at the same time that a case for an earnings recovery in 2024 is emerging, highlighting the conflicting cross currents equities are grappling with.

Trading Like Fed Is Done, Case For Valuation Expansion, EPS Sentiment Improves Feb 07, 2023

This week in the podcast, we touch on hot topics and interesting things that jumped out in our inbound client questions and high frequency indicators. Four big things you need to know: First, recent sector leadership within the S&P 500 is consistent with what we’ve seen in the past after final Fed rate hikes. Second, we continue to find that investors are interested in debating what kind of P/E multiple the S&P 500 deserves in light of current interest rate and inflation assumptions. With this in mind, we’ve refreshed our valuation model which makes the case for valuation expansion as inflation moderates. Third, earnings revisions trends are getting less negative for most S&P 500 sectors, suggesting that sentiment around earnings is improving at the margin, helping explain why the stock market has surged despite estimates continuing to fall in dollar terms. Fourth, we highlight what jumped out from our high frequency indicators last week. Correlations within the S&P 500 and Russell 2000 are falling, and the most popular stocks in hedge funds are outperforming – positive data points for stock pickers and broader US equity market returns.

Keeping A Close Eye on Industrial Layoffs, Case For Stocks Emerging on 2024 EPS Feb 01, 2023

This week in the podcast, we highlight the most interesting question we got last week, some thoughts on earnings, and updates on our high frequency indicators. Three big things you need to know:

First, layoffs for Tech are spiking, a necessary step in the bottoming process for the stock market, while industrial layoffs remain low, supporting the soft landing thesis.
Second, as we combed through the earnings data, a case for stocks may be starting to emerge on 2024 EPS.
Third, we review what jumped out the most on our high frequency indicators last week in terms of sentiment, valuation, and performance, which generally supports the soft landing thesis and suggest that last week’s strong move in US equities was justified.

EPS Backdrop Continues To Soften, Transcript Takeaways, 02-03 Path Still Intact Jan 23, 2023

Today in the podcast, we reflect on hot topics and some of the most interesting things we saw and heard last week for the early reporters and our high frequency indicators. Three big things you need to know: First, the S&P 500 earnings backdrop has continued to soften, a problem for stocks in the very near term. Second, we review key themes we’ve been seeing and reading in our transcript review – which make the case for some near-term indigestion in the market. Third, we run through key developments in our high frequency indicators – which generally tilt positive and add to our conviction that any near-term indigestion in stocks from earnings will be temporary.

Former Leaders Finally Start To Take Their Earnings Lumps Jan 18, 2023

Two big things you need to know: First, 2023 EPS forecasts have continued to soften, with former leadership sectors like Energy finally taking their lumps by participating in the downward revision cycle. Second, S&P 500 stocks with high international revenue exposure have been outperforming domestically oriented companies, as their earnings revisions trends have improved at the same time earnings revisions trends for the domestic bucket (another former leader on performance until recently) have finally started to deteriorate.

Tax Tidbits, TIMT Damage in Context, The ISM Playbook, Small Caps' Solid Start Jan 09, 2023

Today in the podcast, we run through some of the most interesting questions we got from US equity investors last week as 2023 got underway. Four big things you need to know: First, we’ve seen the most discussion about this year’s tax policy changes from Industrials, Financials, Energy and Utilities. Second, the three major growth/TIMT centric sectors account for almost all of the S&P 500’s decline in 2022, but the Tech sector is still a positive contributor to the index on a 3 year basis. Third, the malaise in Tech and leadership by defensive sectors may persist until the market starts to sense that a bottom in ISM manufacturing is close. Fourth, Small Caps are off to a solid start to the year. We think that will continue despite last week’s downtick in ISM manufacturing.

Thoughts on Sectors Heading Into 2023 Dec 21, 2022

Three big things you need to know: First, our analysts have a slightly positive tilt in their outlooks for performance over the next 6-12 months, as well as on other hot topics. Second, on our survey our analysts were most constructive on the performance outlooks for Health Care and Energy, followed by Tech, Utilities, and REITs, with the weakest outlooks for Consumer Staples, Industrials, and Consumer Discretionary. Third, in terms of our own US equity strategy sector recommendations, which leverages our analysts’ views as well as our own tools, we are overweight Energy, Financials, Health Care, Utilities, and Technology, and underweight Consumer Staples and Consumer Discretionary.

Questions From Europe, The Pricey US, Weaker USD & China Reopening Thoughts Dec 12, 2022

Today in the podcast, we reflect on hot topics and some of the most interesting things we saw and heard last week. Three big things you need to know: First, we run through the main topics in our conversations with European based equity investors last week. Second, expensive US valuations relative to Europe are another problem for the US equity outlook in 2023. Third, we highlight initial thoughts on potential sector beneficiaries of a weaker US Dollar and China reopening.

2023 US Equity Market Outlook - The Tug of War Continues Nov 30, 2022

Today in the podcast, our thoughts on the 2023 outlook for the US equity market. Three big things you need to know: First, our year-end 2023 S&P 500 target of 4,100 is unchanged, though we have lowered our 2023 S&P 500 EPS forecast by roughly 4% to $199. Second, we continue to anticipate choppy conditions in US equities over the next few quarters. Third, in terms of higher-level positioning, we prefer US equities over non-US equities, Value over Growth, and Small Cap over Large Cap.

Cooling Inflation Implications, Midterm Musings, 3Q22 Reporting Season Update Nov 15, 2022

Today in the podcast, we reflect on hot topics and some of the most interesting things we saw and heard last week. Three big things you need to know: First, we generally see last week’s cooler-than-expected inflation print as constructive for US equities, with some caveats. Second, while we see the anticipated outcome of the midterm elections as supportive of stocks, we find that we’re less excited than some as we think a divided government has been getting baked in since the mid-October lows and worry that any incremental upside in 4Q will borrow against 2023’s gains. Third, 3Q22 reporting season has revealed a softening of the earnings backdrop, with the best trends in Energy and Small Cap. Please note that Markets in Motion will be taking a break next week for Thanksgiving.

Midterm Election Survival Guide Nov 07, 2022

In this edition of the podcast, we pull together and update our thoughts on what the event means for US equity markets. Three big things you need to know. First, we see the midterms as a modest positive for stocks if the return of Republican control is limited to the House and a bigger positive if Republicans take back control of both chambers. Second, we highlight potential sector beneficiaries if things go well for Republicans. Third, we highlight why we agree with the consensus narrative on the midterms and its stock market impact, and also run through the risks to the consensus narrative that we see.

Int'l Exposure by Index, More Significant EPS Softening, Positioning Nuances Oct 31, 2022

In this edition of

the podcast, we reflect on hot topics and some of the most interesting things we saw and heard last week. Three big things you need to know: First, we revisited the international revenue exposure of the major US indices and sectors. The data suggests to us that as long as the stronger US Dollar is a problem for US companies, that Small Caps and Large Cap Value are the best places to be. Second, with more than half of S&P 500 results in, the softening in the EPS-related stats that we track has become more significant, though we still think there’s another round of clean-up to forecasts that will need to happen in early 2023. Third, sentiment on the growth trade and the new economy has been deeply pessimistic, but it’s been even worse in Small Caps and the old economy.

Small Cap Balance Sheet Fears, Softening EPS Trends, More Midterm Momentum Oct 25, 2022

In this edition of

the podcast, we reflect on hot topics and some of the most interesting things we saw and heard last week. Three big things you need to know: First, we received several questions about how Small Caps look from a balance sheet perspective. The short answer is: worse than Large Cap given shorter maturities and less exposure to fixed rate debt. This is admittedly a risk to our Small Cap overweight, but we are sticking with our call. Second, beat rates and EPS growth expectations have continued to soften now that 3Q22 reporting season is in full swing, as has the tone in company commentary. Third, midterm election developments continue to trend in a stock market friendly way. Republicans have pulled well ahead of Democrats in the generic Congressional ballot and are also now expected to take the Senate in betting markets.

October RBC Analyst Survey Results, Strategy Sector Recommendation Updates Oct 19, 2022

In this edition of the podcast, we update our latest views on sectors and key takeaways from our October RBC analyst outlook survey. Three big things you need to know: First, in our latest survey, taken in early October 2022, our analysts had a slightly positive tilt in their outlooks for performance over the next 6-12 months, with a modestly positive view on valuations and a slightly positive tilt on the state of demand. The most constructive performance outlooks were found in Energy and Health Care, followed by REITs, then Financials, Tech, and Utilities which offset more pessimistic outlooks for Consumer Staples and Consumer Discretionary. There were some interesting shifts in some of these rankings. Second, our analysts don’t seem particularly focused on the mid-term elections, with most seeing the possibility of a split or Republican-led Congress as a neutral event for their industries. To the extent they see it as a relevant event, a good showing for Republicans is seen as the better outcome for their industries. Third, our analysts’ latest sector views support our own, ongoing US Equity Strategy overweights on Energy, Financials, Health Care, and Technology and our underweight on Consumer Staples. Our analysts’ views also support our decision – which we implemented on Monday – to upgrade Communication Services from underweight to market weight and to downgrade Consumer Discretionary from market weight to underweight.

Outlook Update, 3Q22 Earnings Preview Oct 12, 2022

In this edition of the podcast, updated thoughts on our outlook for the US equity market as well as what’s coming up in 3Q22 reporting season. Four big things you need to know: First, we are trimming our S&P 500 EPS forecasts, which were already well below consensus, taking 2022 to $216 (down from $218) and 2023 to $208 (down from $212). Second, we are cutting our year-end 2022 S&P 500 forecast to 3,800 (down from 4,200) and issuing a new, preliminary target of 4,100 for 2023. We expect conditions to remain choppy over the next few quarters but anticipate recovery in 2023 as a whole. Third, 3Q22 reporting season has gotten off to a rough start in terms of stats and tone. The good news is that stocks tend to bottom ahead of the end of the downward earnings revision cycle and concerns about inflation and supply chains as well as expectations regarding pricing may have peaked. Fourth, Small Caps were the star of the show in 2Q22 reporting season, which helped stabilize performance vs. Large Cap. If this happens again, it could help trigger a new phase of Small Cap leadership.

Dollar Doldrums, Lessons from 2002–03, Bright Spots Oct 03, 2022

In this edition of the podcast, we reflect on hot topics and some of the most interesting things we saw and heard last week. Three big things you need to know: First, the stronger Dollar is a clear negative for S&P 500 performance and earnings, but US equities still tend to benefit from safe-haven status within the broader global equity landscape and certain sectors tend to be more insulated from an EPS perspective. Second, S&P 500 performance in 2022 has been similar to how stocks traded in 2002 following the Tech bubble and the initial rally off the September 2001 lows. Back then, the bottoming process was lengthy with similar lows tested multiple times before the recovery could resume, but stocks did stage a strong rebound in 4Q of 2002 off an October low. Third, US equities may not be out of the woods, but there are a few bright spots worth noting in our high-frequency indicators (the equity put/call ratio recently approached Dec 2018’s level, the forward P/E is back to average on our $212 EPS forecast, the performance of popular hedge fund stocks has stabilized, and Republicans have pulled ahead of Democrats in the generic Congressional ballot).

Inverted Curve, Deep Dive Into P/Es vs. Rates & Inflation, The Next Big Test Sep 25, 2022

This week in the podcast, we reflect on some of the most interesting questions we got and things that we saw last week. Three big things you need to know: First, positioning trades within US equities tend to be fairly mixed during yield curve inversions (a topic of focus in our investor meetings even before the FOMC) but have a classic defensive bias. Second, an S&P 500 P/E of ~16x seems reasonable based on post-FOMC interest rate and inflation views and our analysis of the relationship between rates, inflation, and P/Es dating back to the 1970s. Third, the 3,500 level on the S&P 500 will be key to watch as it represents the point at which a median recession would be priced in and the S&P 500 P/E based on 2023E EPS would fall below average again, using our below-consensus EPS forecast of $212.

Growth Unwind Late Innings, Democrats Gain More Momentum, Reasonable Valuations Sep 20, 2022

This week in the podcast, we reflect on some of the most interesting things we saw last week in terms of our high-frequency data updates. Three big things you need to know: First, positioning in the Growth trade no longer looks worrisome. Second, Democrats continue to gain momentum in polling data, stoking election angst among US equity investors. Third, valuations are starting to look reasonable again for the S&P 500.

Tug of War Into Year End Sep 13, 2022

Today in the podcast, we update our thoughts on the broader US equity market outlook as well as bigger picture positioning trades. Three big things you need to know: First, there’s no change to our year-end 2022 S&P 500 target of 4,200 or our 2023 S&P 500 EPS forecast of $212, though we have tweaked our 2022 S&P 500 EPS forecast up to $218 from $214. Second, we continue to anticipate choppy conditions through year end, in which stocks are caught in a tug of war between deeply bearish sentiment and ongoing concerns about further Fed tightening and its longer-term economic ramifications and downward earnings revisions. The mid-term elections remain a major headache, but may ultimately still be a positive catalyst. Third, we continue to prefer US equities over non-US equities and Small Cap over Large Cap. We wouldn’t be surprised to see the pause in Growth leadership persist in the near term, but still like Growth over Value longer term given that we expect a sluggish economic backdrop to be the price markets will have to pay for a short/shallow economic downturn.

End of Summer Update on our Sector Views Aug 31, 2022

Today in the podcast an update on our own sector views and the outlooks of our US analyst team. Three big things you need to know: First, in our latest RBC US equity analyst survey, taken in late August 2022, our analysts leaned modestly positive in their outlooks for performance over the next 6-12 months, and also had modestly positive views on valuations and demand. The most constructive outlooks were found in Energy, Financials, Health Care, and Tech and offset more pessimistic outlooks for Consumer Staples, Consumer Discretionary, Communication Services and Materials. Second, our analysts don’t seem particularly alarmed about the buyback and corporate tax provisions in the Inflation Reduction Act, but our survey suggests the latter will be more relevant to the stock market. Third, our analysts’ latest sector views support our own, ongoing US Equity Strategy overweights on Energy, Financials, Health Care, and Technology and our underweights on Consumer Staples and Communication Services. Given our concerns about another bout of volatility in stocks in the coming months and a potential pause in the Growth leadership trade, Health Care, Energy, and Financials look most intriguing to us at the moment, but we continue to like Tech as a longer-term rebound play.

Small Cap EPS Revisions Signal, Mid Term Headache, Where Valuations Stand Aug 29, 2022

Today in the podcast, we reflect on some of the most interesting things we saw last week in terms of charts, questions, quotes and high frequency data. Three big things you need to know: First, our chart of the week (inspired by our top investor question) highlights how the Russell 2000 has been able to establish major bottoms in past periods of extreme stress about 3-6 months before EPS forecasts started to turn positive again. This time has been different, however, as Small Cap EPS revisions actually turned slightly positive a few months ahead of the June low in the R2000. Second, political polling data, mid-term betting markets, and recent political news flow continue to highlight a shift in momentum back in Democrats’ favor, a growing headache for the stock market in the near-term. Third, stock market valuations improved after Friday’s Jackson Hole sell-off but don’t look cheap.

2Q22 Hedge Fund Handbook: Conflicting Market Signals, LT Opportunity In Growth Aug 25, 2022

Today in the podcast, our takeaways from our review of the 2Q22 stock-level holdings of more than 300 hedge funds based on the 13f’s that were recently released. Three big things you need to know: First, the performance of the most popular S&P 500 stocks in hedge funds has started to weaken after initially showing some signs of stabilization in late 2Q – a potentially negative signal for the broader market in the near-term. Second, hedge funds began 3Q22 with overweights to cyclicals and commodities that were at post GFC highs, overweights to defensives that were below peak, and underweights in secular growth – something that tells us the longer-term opportunity remains in the Growth trade. Third, the performance of the most popular Russell 2000 stocks in hedge funds has started to stabilize – an admittedly conflicting, positive signal for stocks.

Signs of Stress Emerging, Not Sufficient To Call An End To The Rebound Yet Aug 23, 2022

Today in the podcast, we reflect on some of the most interesting things we saw last week in terms of insightful charts and questions plus the high-frequency sentiment, economic, and political indicators we track. Three big things you need to know: First, our chart of the week highlights how the S&P 500 has been able to establish major bottoms in past periods of extreme stress before EPS forecasts were fully cut. Second, our question of the week addresses investor concerns that valuations no longer look appealing for the stock market following the big summer rally. Our work indicates that S&P 500 valuations are above average but below recent major peaks, while Small Caps still look attractively valued, telling us valuation pressures are not sufficient to call an end to the summer rebound just yet. Third, what jumps out most in our sentiment work is that Nasdaq futures are starting to look overbought in the weekly CFTC data for asset managers, a negative data point for the market, but that positioning in S&P 500, R2000, and Dow contracts are still in the early days of their recoveries, a positive signal.

Low Quality Playbook, Ripped Off Band-Aids In Small Cap, Consumer Stabilization Aug 15, 2022

Today in the podcast, a few thoughts on the composition of the snap back in stocks, where the earnings band-aid may have been ripped off within Small Cap, and the thing that caught our eye in our sentiment indicators. Three big things you need to know: First, low quality has started to work within Large Cap, something that’s frustrating investors, but began for Small Cap in June and typically happens after stocks have found their mid recession bottom. Second, we’ve been getting asked by Small Cap investors about where earnings sentiment has been most depressed within the Russell 2000 – similar to Large Cap it’s a number of key consumer/Tech/cyclical groups. Third, what jumped out most in terms of our sentiment indicators last week is that consumers of all political affiliations are feeling a little bit better in August, helping consumer sentiment stabilize a bit in the University of Michigan survey.

Recession Fears, Buyback Tax, Shifting Sentiment & Polling Data Aug 10, 2022

Today in the podcast, we highlight the most interesting chart we saw last week, the most interesting question we got last week, and some noteworthy shifts we’re seeing in some of the high frequency indicators that we track. Three big things you need to know: First, the most interesting chart we saw last week highlights how recession talk among S&P 500 companies is back to 2020 highs. Second, the most interesting question we got last week was on the 1% stock buyback tax in the Inflation Reduction Act. Third, our sentiment indicators, which have been a contrarian buy signal for stocks, are showing some signs of healing which is a positive for the stock market, but some of our political polling indicators are starting to shift in a way that’s unfriendly for stocks and are telling us that we need to keep a close eye on the midterms.

2Q22 Halftime Report Aug 03, 2022

Today in the podcast, our takeaways on 2Q-2022 reporting season, with more than half of S&P results in. The big things you need to know: First, 2H22 and 2023 forecasts have started to come down, but perhaps not enough. Second, within the S&P 500 sector standouts so far include Energy, REITs and Utilities along with Tech. Third, Small Caps are the star of the show so far.

Pulling Off the Band-Aid, Going Overweight Small Cap Jul 25, 2022

Today in the podcast, we update our outlook for the S&P 500 and several key positioning trades. The big things you need to know: First, we’ve made another cut to our YE 2022 S&P 500 price target to 4,200 from 4,700 and have lowered our S&P 500 EPS forecasts to $214 for 2022 and $212 for 2023. Second, looking into the back half of the year, the midterm election could be a positive catalyst for stocks and help stocks find a bottom, if one hasn’t been established already. (3) In terms of positioning, we continue to prefer US equities over non-US equities and Growth over Value. Meanwhile, our conviction level on Small Caps has strengthened and we are now going overweight Small Cap.

Sector Navigator Jul 19, 2022

Today in the podcast, an update on our latest RBC equity analyst outlook survey, which we just completed, plus an update on our own latest US equity strategy sector views. Three big things you need to know: First, in our latest analyst survey, our US industry analysts were most constructive on Energy, Financials, Health Care, and Tech, and least constructive on Communication Services, Consumer Discretionary, Consumer Staples, and Materials. Second, in terms of sectors that we like from a strategy angle, we remain overweight Tech and Financials, and we upgraded Energy and Health Care to overweight from market weight. Third, on the other end of the spectrum, we lowered Consumer Staples to underweight from market weight and upgraded REITs from underweight to market weight. We remain underweight Communication Services.

Natural Gas – It Isn’t Over Jul 12, 2022

In this week’s RBC’s Markets in Motion podcast, Chris Louney, Commodity Strategist, guest hosts to discuss his latest views on the natural gas markets.

Today in our 6:15 minute podcast, we discuss the factors impacting US natural gas prices this year and beyond. Natural gas prices generally are attracting far more attention amid headlines of energy prices broadly, inflation worries and economic concerns, and even energy crises that have in many ways held outsized interest in the market. While global gas prices remain on another level, US gas prices also reached very high levels earlier this year, and even after some recent developments, they still remain quite elevated.

We cover three main themes in this episode. First, geopolitical premiums are now present in US natural gas markets in a way they were not before. We draw on both an analysis we did earlier this summer as well as some learnings after an explosion that shut down a major US facility early last month. This leads us to our second point - our view for the remainder of this year. We think gas prices should average north of $6/MMBtu in the US, a view that previously was our high scenario, and now looks like the more probable one for the remainder of the year. Third, in all of our scenarios US gas prices fall next year. While we are by no means returning to the lower-for-longer price environment many had gotten used to, we do expect lower gas prices in 2023 as production comes online and there is less structural growth on the other side of the balance y/y, albeit with the caveat that geopolitics are here to stay for US natural gas.

Oil Market in Disarray Jul 07, 2022

In this week’s RBC’s Markets in Motion podcast, Michael Tran, Commodity and Digital Intelligence Strategist, guest hosts to discuss his latest views on the global oil market dynamic.

Today in our 11:30 minute podcast, we discuss the recent oil price volatility and explore the dynamic between the push and pull between the looming threat of a recession which is being stacked up against the strongest fundamental oil market set up in decades, or maybe even ever.

Three things to know: First, given the recent price rout, the financial oil market is dislocating dramatically from an extremely tight spot physical market. Near record Atlantic Basin physical pricing differentials, the Saudi hike to Official Selling Prices (OSPs) and the CPC pipeline outage are indicative that the steadfast physical market is telling a diametrically opposed story to the plunging paper market. The physical market is pricing in scarcity while the financial market is pricing in recession.

Second, despite the recent plunge in oil prices, term structure remains relatively intact, surprisingly. This means that the term portion of the curve is also retracing significantly lower. Unless the recession is deep and protracted, we believe that the dated calendar strips are largely undervalued. However, the near term recessionary risks must be respected. In a recessionary scenario in which demand is impacted at a similar rate as previous downturns, we could see a scenario in which spot prices retreat into the mid $70/bbl range in the back half of this year. Now, we only place a 15% probability to such an outcome, but we have all been doing this long enough to know that oil price moves can be swift, violent and unforgiving, in both directions. The bullish conviction is high, but sentiment is soft among the commodity trading community.

Third, while the debate regarding the health of the consumer remains an open ended question, large scale demand destruction is rare. Over the past 30 years leading into the pandemic, there were 39 individual months in which retail gasoline prices increased by more than 30%, YoY. Of those instances, we have seen gasoline demand fall by 2% or more on only 12 of those occasions. And five of those instances took place during the 2008 Great Financial Crisis. In short, protracted demand destruction events have historically been rare, absent a recession. That said, the strength of the US dollar means that oil priced in local currencies is still punching in either at or near all-time record highs for many regions across the globe.

Conversations From The Road, Part 2 Jul 01, 2022

Today in the podcast, our thoughts on a few additional questions that we’ve been getting from equity investors in our recent travels across the US, a topic we also explored in our last podcast. Three big (new) things you need to know: First, equity investors have been asking us whether inflation has been good for stocks and earnings. We think that it has, and view moderating inflation as more of a headwind in the outlook for stocks than many investors may realize. Second, a number have asked our opinion on the low quality trade. We’ve reminded investors that low quality tends to outperform after the stock market has found its mid-recession bottom. We’d expect the same this time around for a short period of time. Third, a number have asked if we could dig deeper on our sector recession playbook analysis, and we’ve replicated it for the 24 industry groups. Areas that tend to outperform during recessions as well as the broader market drawdown and rebound phases include Commercial & Professional Services, Consumer Services, Materials, Retailing, and Transportation.

Conversations From The Road Jun 21, 2022

This week in the podcast, highlights from our conversations with institutional equity investors last week, plus updates on the valuation and sentiment indicators we’re watching. Five big things you need to know: First, we’ve outlined two possible recession paths for S&P 500 EPS which suggest a valuation case for the S&P 500 can be made today on next year P/E if the recession is short-lived or at 3,200 on current year EPS. Second, as investors seek out clues on what’s been de-risked, we’ve been highlighting why the risk/reward for Small Caps has improved and note that Russell 2000 valuations returned to levels that often mark the low last week. Third, on sectors, we’ve also been highlighting how defensive sectors have been close to peak valuation vs. Secular Growth and Cyclicals, how Energy’s strong move up in early 2022 is out of sync with the typical recession drawdown, and how declines in Consumer Discretionary and Communication Services are already baking in recession to a significant degree. Fourth, the midterm elections are starting to emerge as a potential positive catalyst for US equities later this year in the eyes of some investors. Fifth, institutional investor sentiment appeared to get closer to a bottom last week.

Thoughts on Friday’s CPI Print & US Equities Jun 14, 2022

This week in the podcast, some quick thoughts on US equities in the aftermath of Friday’s hot CPI print and subsequent sell-off. Three big things you need to know: First, the recent rise in long-run inflation expectations in the University of Michigan Consumer Sentiment Survey suggests that Value oriented sectors may continue to lead for a bit longer. Second, our look back at the historical playbook for US equities around recessions provides some insight into how low the S&P 500 could go. Third, our weekly sentiment indicators continue to highlight the deeply negative views that already pervade the investment community.

Trimming Our S&P 500 Target, Getting More Intrigued With Small Caps Jun 07, 2022

This week in the podcast, we’re updating our outlook on the broader US equity market. Three big things you need to know: First, we have trimmed our S&P 500 year-end 2022 price target to 4700 from 4860. This is a housekeeping move. We are continuing to bake in a slower economic growth backdrop in 2022-2023 as opposed to a recession. Second, we continue to be more intrigued with Growth over Value going forward as most of our indicators look better for Growth or are fading for Value. Third, we recommend removing underweights on Small Cap and moving back to neutral vs. Large Cap, as Small Cap looks intriguing or better on our positioning/sentiment, valuation, and earnings work. The better risk/reward for Small Cap is something that reinforces our view that equity markets generally can move higher through year end.

Why We're Not Chasing Consumer Staples May 27, 2022

This week in the podcast, we dig into Consumer Staples, the third best performing sector in the S&P 500 so far in 2022. The big thing you need to know: We are sticking with a market weight stance on the sector. The tailwinds that have boosted sector performance so far this year (a favorable macro backdrop for defensives, rising recession fears, strong money flows, and a higher quality profile than other defensives) may continue to support leadership in the sector in the near term. But our list of concerns on the sector is growing, and includes extremely problematic valuations, crowded positioning, earnings revisions risk, a weaker ESG profile, and a cautious outlook from our analyst team. On a 6-12 month view, we think staying neutral makes the most sense and we’re reluctant to chase.

The RBC Hedge Fund Handbook – No Shelter from the Storm, Yet May 23, 2022

In this week’s podcast, we run through our takeaways from the first quarter 13fs of more than 300 of the biggest US-based hedge funds, which came out last week. Three big things you need to know: First, our review of the performance trends and relative valuations of the most popular S&P 500 stocks in hedge funds suggests to us that the pandemic froth is out of these names, an important milestone, but on the valuation side there may still be some room to fall. Second, we are keeping a close eye on the performance trends of the most popular hedge fund stocks relative to the broader market as another gauge of institutional investor sentiment. Third, in terms of sector positioning, what jumps out to us the most is that while hedge fund positioning in Consumer Staples remained underweight relative to the Russell 3000 as 1Q22 came to an end, the underweight has narrowed and is back to its 3Q16 high, which we view as another cautious data point on the sector.

Stocks at a Crossroads May 16, 2022

This week in the podcast, our

latest thoughts on economic expectations, sentiment, and valuations. The big

things you need to know: First, the S&P 500 is still trading as though it’s

experiencing a growth scare, a framework that has been pointing to downside in

the S&P 500 to ~3,850. Current trends in economic forecasts continue to

support the idea that this is the right way to think about how far stocks

should fall. Second, institutional investor sentiment has made significant

progress catching down to retail investor sentiment, with overall US equity

futures positioning among asset managers now below 2020 & Great Financial

Crisis lows, and getting close to 2011 and 2015/2016 lows – something that

makes the case for a bottoming in stocks relatively soon if recession fears can

be kept at bay. Third, while valuations aren’t yet a reason to buy US equities

on their own, they are no longer a problem for the market as a whole.

The Sentiment Signals We're Watching May 03, 2022

This week in the podcast we tackle the topic of investor sentiment, which has been back in focus given the S&P 500’s recent decline. The big things you need to know: First, the 13.9% drawdown in place at Friday’s close is near the range of prior growth scares, but our growth scare framework points to possible downside in the S&P 500 to 3,850 even with no recession if the Friday low doesn’t hold. Second, net bullishness on the AAII retail investor survey broke to a new post-Financial Crisis low last week, a contrarian buy signal for stocks on a 12-month forward basis. Third, positioning among asset managers in US equity futures hasn’t been quite as extreme, which suggests that institutional investor sentiment still needs to catch down to retail investors. Fourth, other widely watched fear gauges, the VIX and equity put/call ratio have moved up, another longer-term contrarian buy signal for stocks, but don’t look extreme yet. Overall, we think the data continues to paint a picture of extreme fear and a contrarian opportunity for longer-term investors, even though there is scope for further movement/more downside in the very near term on some gauges.

Bond Yields Take A Bite Apr 25, 2022

Four big things you need to know: (1) First, we’ve trimmed our year-end 2022 S&P 500 price target from 5,050 to 4,860. The recent move up in bond yields was the biggest contributor to the downward revision to our forecast. (2) Second, we think US equities are likely to keep benefiting from safe haven status for a bit longer. (3) Third, we continue to be more intrigued with Growth than Value going forward, though we’d be highly selective in our Growth exposure. (4) Fourth, while Small Caps are looking interesting again on valuation and positioning, we remain concerned that fundamentals will stay challenging for Small Caps given the downshift in economic expectations towards slower growth.

1Q22 Earnings Preview Apr 13, 2022

Today in the podcast, our thoughts on the 1Q22 reporting season, which kicks off this week in earnest with Financials. The big things you need to know: First, full-year S&P 500 EPS forecasts on the sell-side for 2022 and 2023 have moved up $5-6 since January, but underlying expectations regarding the path of profitability are likely more conservative than this stat suggests. Second, forward-looking expectations are being propped up by a few sectors, including Energy and Tech. Third, our quantitative transcript review highlights the extent to which demand, inflation, price hikes, labor, the Fed, and Russia/Ukraine have been in focus in recent company commentary, and we expect these issues will remain key themes in 1Q22 earnings calls. Fourth, in our manual review of earnings call transcripts, one thing that’s really jumped out to us has been commentary on the consumer, which we think reflects a shift from goods to services spending and overall resilience.

The Not So Mysterious Case of the Vanishing Bulls Apr 06, 2022

Today in the podcast, we run through the results of our quarter investor survey, which we conducted from March 28th to 31st of 106 institutional equity investors. The big things you need to know: First, stock market bulls nearly vanished in our 1Q22 survey. Second, valuations, margins, the Fed, gas prices & Russia/Ukraine are weighing heavily on investors, but on Russia/Ukraine some of the more dire outcomes aren’t seen as probable, and opinions on recession are split helping explain why us equities have been rebounding. Third, we saw a cautious bent to positioning views. Fourth, the survey results reinforce our belief that the US equity market has already baked in a lot of bad news, at least in part, but that the onset of a recession or major broadening out/worsening of the Russia/Ukraine war are key downside risks to monitor.

Our Analyst Survey Says It's Time to Ease Up on Energy Apr 04, 2022

Today in the podcast, we’re focusing on the results of our quarterly RBC analyst survey, which we conducted in late March and helps us incorporate the bottom-up views of RBC’s team of equity analysts into our top-down strategy sector recommendations. Five big things you need to know: First, outlooks among our analysts for performance over the next 6-12 months continue to tilt positive. Second, on performance over the next 6-12 months, our analysts remained highly constructive on Financials, Health Care, and Technology, but enthusiasm on Energy faded. Third, on issues other than performance, Health Care and Utilities generally rank well relative to other sectors. Fourth, as for what’s keeping our analysts up at night, many mentioned demand related issues in their discussions of key upside and downside risks. Fifth, triggered by our survey results, as well as our desire to reduce exposure to Value, we are lowering our recommendation on Energy from overweight to market weight.

Latest Rundown On ESG Flows Mar 25, 2022

This week in the podcast, guest host Sara Mahaffy, RBC’s ESG Strategist, runs through the team’s latest work on ESG flows. Inflows into US listed ESG ETF’s have been relatively strong so far in early March, and we’ve seen relative performance trends for ESG darlings stabilize. Clean energy flows have also bounced back in March.

The Last Time We Were Here Mar 14, 2022

This week in the podcast, we run through a few new thoughts on Russia /Ukraine from a US equity market perspective. Three big things you need to know: First, the big, obvious risks to our call on the S&P 500 are the possibility that the war will turn into a prolonged conflict involving NATO or the possibility that the US will slip into recession. We took a look at the historical playbook for stocks during WW2 and past recessions as a starting point for how to think about possible downside levels in the index should either of these risks materialize. Second, we are starting to see some shifts in momentum in political polling data back in Biden and the Democrats’ favor, which are worth keeping a close eye on given the mid term elections coming up in November. Third, public company commentary on the Russia/Ukraine crisis has surged and while most companies have said direct exposure is minimal, the broader conversation reflects a significant degree of uncertainty surrounding the impact of the event – reinforcing to us that the stock market either needs more time to digest what’s happening or an outright de-escalation of the conflict in order to stabilize.

Where Things Stand At This Particular Moment In Time Mar 07, 2022

In this week’s podcast, we run through the takeaways from our latest Macroscope report, our big monthly chart book in which we update our thoughts on the US equity market outlook from both a top-down and bottom-up perspective. We know all eyes are focused on Russia and Ukraine, but we thought it's important to pause and reflect on where things are at this particular moment in time. Three big things you need to know: First, we continue to see a path for the S&P 500 to our 2022 year-end price target of 5,050, but remain mindful of risks to our view. Second, we’re getting closer to an inflection back to Growth leadership. Third, Small Cap outperformance vs. Large Cap since early February seems deserved, but we suspect that it will be short-lived.

Running the Numbers Feb 28, 2022

This week in the podcast, our latest thoughts on Russia’s invasion of Ukraine from a US equity market perspective. Three big things you need to know: (1) First, while the duration of growth scares in the S&P 500 since the Financial Crisis has varied, recoveries tend to be quick and powerful. (2) Second, individual investor sentiment took another hit last week and remains below pandemic lows - a contrarian buy signal for stocks. (3) Third, while stocks have fallen a bit more than we expected to start the year and we are mindful of risks to our view, we are sticking with our 5,050 year-end S&P 500 price target for 2022.

Russia Rundown Feb 18, 2022

This week in the podcast, we run through our thoughts on what a Russian invasion of Ukraine might mean for US equity markets going forward. Three big things you need to know: First, US public companies haven’t been talking much about geopolitics or Russia/Ukraine recently, but the level of conversation is starting to pick up. Second, RBC’s US equity analysts see the potential for slowing growth/recession in Europe, higher energy prices, and potential impacts on supply chains as the most relevant challenges for their industries if a Russian invasion of Ukraine occurs. Third, we continue to believe that geopolitical risk emanating from Russia/Ukraine is not priced into the US equity market, should conditions worsen, and will be a key issue to watch in the weeks and months ahead.

Bottoming, Stabilization, Recovery, and Risk Feb 14, 2022

This week in the podcast, we run through our latest thoughts on earnings, sentiment, trends in high frequency indicators, and Russia. Five big things you need to know: First, with 4Q21 reporting season starting to wind down, the earnings outlook remains stable. Second, in terms of the rate of upward EPS estimate revisions, Value and Cyclicals continue to outshine Defensives and Secular Growth. Third, retail investor sentiment has started to stabilize on the AAII survey and positioning in Nasdaq and Russell 2000 futures also suggests both Growth and Small Caps are oversold. Fourth, high frequency indicators are still recovering for the most part, casting doubt on recession fears. And fifth, while we continue believe the Fed is mostly priced in to the S&P 500, a Russian invasion of Ukraine may not be and currently presents one of the key risks to the stock market.

Halftime Report For 4Q21 Reporting Season Feb 07, 2022

This week in the podcast, we run through our main takeaways on 4Q21 reporting season, with just over half of S&P 500 results in. The big things you need to know: First, the earnings resiliency we discussed in our last Spotlight solidified over the past week, supporting the stock market. Second, early sector standouts include Tech, Energy, and Health Care. Third, our quantitative transcript review suggests confidence has slipped a little, along with demand and margin views. Fourth, our manual review of earnings calls transcripts has kept us vigilant on the consumer, but not panicked.

Five Good Things We See In The Data Feb 02, 2022

This week in the podcast, we run through five good things we’re seeing in the data right now for the broader US equity market right now. First, bottom-up 2022 and 2023 EPS forecasts have been holding steady. Second, the contraction in the S&P 500 forward P/E is in line with past Fed tightening periods. Third, the valuation gap between the most expensive and least expensive stocks is getting close to pre-pandemic levels. Fourth, retail investor sentiment is back to pandemic lows. Fifth and finally, Small Cap futures positioning is on the cusp of net short territory, and isn’t too far above where it bottomed in March 2020.

A Bad Start, Perhaps Just Bad Enough Jan 24, 2022

In this episode, we run through early takeaways from the 4Q21 earnings reporting season, a few new thoughts on the Growth/Value rotation, and an update on investor sentiment. Four big things you need to know: First, performance has been poor, with 63% of S&P 500 companies falling significantly post results and companies missing on revenues getting hit hardest. Second, our transcript review suggests that labor is emerging as the new hottest topic, and that omicron disruption may have been greater than anticipated. Third, our valuation work suggests that progress has been made on the Growth rotation, but that it still has room to go. Fourth, retail investor sentiment is close to pandemic lows, a positive for stocks on a 12-month view.

The Stock Market’s Tug of War Jan 19, 2022

In this edition of the podcast, we discuss the biggest takeaways from the publication of Macroscope, our big monthly chartbook digging into the US equity market from top to bottom, looking at everything from the S&P 500 to style to sectors to industries to factors and Small Caps. Two big things you need to know. First, we’re sticking with our 5,050 forecasts for the S&P 500 at year-end 2022, a tougher year but one that ultimately sees modest gains. Second, while we still like Value and Cyclicals in early 2022, we’ve lost faith in Small Caps’ ability to see an early year outperformance trade and dig into the reasons why.

Happy New Year to Value Jan 14, 2022

In this edition of the podcast, we review our latest thoughts on the fierce rotation we’re seeing from Growth to Value and Cyclicals so far in 2022. Two big things you need to know: (1) We think it’s premature to declare the rotation out of Secular Growth into Value and Cyclicals over yet. (2) We’ve continued to get questions about what to own in a rising rate environment – our answer is pretty simple – sell what’s expensive (a list still dominated by Tech) and buy what’s cheap (a list still full of commodities and Financials).

Confidence That Companies Will Continue to Manage Through Jan 04, 2022

This week in the podcast, we run through the results of our quarterly RBC US equity analyst survey, which we conducted in late December 2021. The big things you need to know: First, our analysts’ outlooks for performance over the next 6–12 months remain optimistic, boosted by constructive views on fundamentals, valuations, cash deployment, and margins. Second, across all questions, our analysts tilt positive on Energy, Financials, Materials, and Information Technology, along with Utilities and Health Care. Third, key issues in focus for our analysts are demand, COVID, inflation, regulation, labor, supply chains, and pricing power. What jumped out the most on hot topics is that our analysts generally see their companies as able to manage through the major challenges ahead, including Omicron.

RBC Snap Survey Results – Divided and Conflicted Dec 22, 2021

This week in the podcast, we’re running through the results of our December US equity investor survey, conducted December 16th through 21st. Three big things you need to know: First, half of investors are optimistic on stock market performance over the next 6-12 months, supported by constructive views on the economy and cash deployment, but weighed down by concerns about valuations, policy and margins. Second, in terms of hot topics, monetary policy and inflation top the list of issues keeping investors up at night. Third, in terms of positioning, High Quality, US, and Large Caps, were the most popular choices for outperformance over the next 6-12 months, as the popularity of Value, Cyclicals, Financials and Energy faded.

US Equity Market Outlook: Goodbye to 2021 Dec 15, 2021

This week in the podcast, we recap some of the conversations we’ve been having with investors in December about our 2022 forecasts. Two big things you need to know: First, investors have been keen to discuss the downside risks to the stock market. While we’re still constructive on 2022, and are still looking for 5,050 on the S&P 500, we outline five things we’re concerned about regarding the broader market, which could generate volatility during the year, particularly early on. Second, as we’ve discussed our view that Value, Cyclicals, and Small Cap will lead early in the year while Growth, Secular and Large Cap will lead late in the year, the investors we’ve been speaking with have wanted to explore what our thoughts are on the timing and triggers of that mid-year leadership shift.

Investor Views on the Omicron Variant Nov 30, 2021

This week in the podcast, we review the results of our November 29th investor survey on views regarding the omicron variant. The big things you need to know: (1) “Neutral/don’t know” was the most popular response to our question on the general outlook for Omicron with more than one-third of respondents, but nearly half put themselves into the optimistic or very optimistic camp. (2) Roughly half saw no impact on the path of tapering, while views on the impact of the path of hikes were split between those who said hikes will be delayed and those who said there’s no impact. (3) Roughly half said they are not doing anything with regard to portfolio positioning until they have more information. (4) Vaccine efficacy and severity of disease were the biggest questions on investors’ minds.

Catching Up Nov 15, 2021

This week in the podcast, we review our latest thoughts on the broader US equity market outlook. The big things you need to know: First, last week we moved our 2022 S&P 500 target up by ~3% to 5,050 from 4,900, adjusting our forecast for the bigger than expected move we’ve seen in the index as 2021 starts to wind down and the latest updates in our models. We continue to see 2022 as a solid year for the US equity market, but with more moderate gains than we’ve experienced in 2021. Second, we highlight how inflation has helped prop up US equity positioning, making it tough to be too bearish on US equities in the wake of last week’s higher than expected CPI print. Third, we discuss the breakout that Small Caps are attempting in November, and reiterate our view that Small Caps and Value are likely to see another burst of out performance between now and mid 2022.

Three Thoughts on the US Equity Market’s Recent Resiliency Nov 02, 2021

This week in the podcast, we review our latest thoughts on the US equity market’s recent resiliency. The big things you need to know: First, US equities tend to outperform bonds when the Fed is hiking rates, providing one longer-term reason for US equity market resiliency as the timing of Fed rate hikes remains in focus. Second, negative real yields, which are close to their lowest levels post Financial Crisis, also remain supportive of US equity markets for now. Third, last month’s peak in freight rates helped to put in what has been, at least for the moment, a bottom in the S&P 500 and the cyclical trade as investors have been inclined to latch onto glimmers of hope on the supply chain problem.

Individual Investors Bounce Back, As Earnings Season Ramps Up Oct 26, 2021

This week in the podcast, we review our latest thoughts on investor sentiment and 3Q21 earnings season. The big things you need to know: First, in terms of investor sentiment, optimism continued to build among individual investors last week, while institutional investor positioning stabilized. Second, reporting season stayed “good enough” for the stock market to keep moving up last week. Strong beat rates and company commentary that emphasized the strength of underlying demand and the ability of many (though not all) companies to manage through inflation and supply chain pressures allowed the S&P 500 to make a new high, even though the few companies that did miss lagged sharply.

A Good Enough Start To 3Q21 Reporting Season Oct 19, 2021

This week in the podcast, we revisit our work on investor and earnings sentiment, which we’ve been watching closely post Labor Day, offer a few thoughts on earnings season which officially got underway last week, and offer some new thoughts on supply chains. Four big things you need to know: First, individual investor sentiment may be starting to recover, after turning deeply bearish last month. Second, earnings sentiment has continued to deteriorate for the S&P 500, but may soon bottom in Industrials and Materials, supporting the idea that much of the pain from supply chain pressures may already be baked into those sectors. Third, 3Q21 reporting season is off to a good enough start in terms of the stats, and the commentary from companies has also continued to emphasize strong underlying demand. Fourth, we see other glimmers of hope – in data – on supply chains beyond the recent decline in freight costs that has captured investors' attention.

The View From The Trenches Helps Put Current Worries Into Context Oct 12, 2021

This week in the podcast, we run

through the results of our latest quarterly RBC analyst survey, in which we

poll the firm’s equity analysts on the outlooks for the industries they cover.

The big things you need to know: First, outlooks for performance over the next

6-12 months remain optimistic, driven by constructive views on fundamentals,

valuations, and cash deployment. Second, our analysts tilt most positive on

Financials, Energy, Information Technology, Utilities, and Health Care, and

least positive on REITs and Industrials. Third, policy outlooks generally

remain cool, though it’s worth noting most see higher corporate taxes as a

moderate problem for earnings and performance as opposed to a major one.

Fourth, while margin expectations have eased only a handful of our analysts

consider supply chains to be a major problem for the industries they cover.

The Mood of the Market Has Gotten More Pessimistic, But Investors Are Still Buying Value Oct 05, 2021

In this episode, we’re continuing to explore the state of investor sentiment by digging into the results of our late September US equity investor survey. Four big things you need to know: First, pessimists on the overall US equity market continued to rise, but remained below past highs. Second, the deterioration in the overall stock market outlook occurred alongside persistent valuation concerns, and deteriorating margin expectations, as well as slipping optimism on cash deployment and the economy. Third, on the hot topics in the market, investors are most concerned about China, geopolitical risk, and monetary policy. Fourth, investors are still leaning into select parts of the reflation trade.

Institutional Investor Sentiment Finally Takes A Hit Sep 30, 2021

This week in the podcast, we discuss the latest developments in investor and earnings sentiment, which we’ve been keeping a close eye on this month, as well as a few thoughts on the rotation out of growth we’ve been seeing this week.

Three big things you need to know. First, institutional investor positioning has finally taken a hit. Second, earnings sentiment has continued to deteriorate, driven by cyclicals and supply chain concerns, but so far the damage has been concentrated in a few sectors. Third, we think there’s more to the rotation out of Growth this week than higher bond yields, but regardless this rotation has become another catalyst for downside in the US equity market in the near-term. Our bottom line, as we think across all of these issues, is that the volatility we’ve been in as regards to the broader US equity market likely isn’t done yet.

Supply Chain Concerns Spark Deterioration In Investor & Earnings Sentiment Sep 20, 2021

This week in the podcast, we tackle three topics: investor sentiment, earnings sentiment, and supply chains.

Three big things you need to know: (1) First, individual investor sentiment has fallen so hard recently, it may soon send a contrarian buy signal. (2) Second, earnings sentiment has started to deteriorate, led by Cyclicals, but Secular Growth has stayed resilient. (3) Third, we highlight what we’re watching on supply chains -- specifically, the rate of change in freight costs, global COVID trends, and regional Fed surveys -- where we are seeing some faint glimmers of hope.

Aftershocks Sep 14, 2021

In this episode, we update our thoughts on the broader US equity market outlook. Three big things you need to know: (1) First, we are lifting our 2021 EPS forecast and price target by ~4%, and lifting our 2022 EPS forecast by ~3%, while also introducing our S&P 500 price target for 2022 which calls for a 9% annual gain. (2) Second, we continue to see risk of a pullback in the S&P 500 before year-end, but view it as a buying opportunity. (3) Third, one key risk that we are monitoring for the stock market – and our call – is the possibility that S&P 500 EPS growth will turn negative in early 2022.

Sustainable Fund Flows, Themes in Focus & New Fund Launches Aug 30, 2021

This week in the podcast, guest

host Sara Mahaffy, RBC’s ESG Strategist, runs through the team’s latest work on

sustainable fund flows, ESG themes in focus, and trends in new sustainable fund

launches.

The Dog Days of Summer Aug 24, 2021

This week in the podcast, we provide an end of summer

update on our earnings transcript review and the high frequency economic,

sentiment, and virus indicators that we track. We also offer a few thoughts on

what tapering means for US equity markets. Three big things you need to know:

(1) Last week’s earnings calls provided an important reminder about the

strength of the consumer. (2) The reflation trades remain tethered to COVID

trends. (3) We think equity investors have already priced in tapering to a

significant degree, given the underperformance of Value and Small Cap that we

saw earlier this summer.

Back to the Future Aug 16, 2021

In this week’s podcast, we take a closer look at the recent impact of the COVID backdrop on the US equity market. The three big things you need to know: (1) First, COVID has taken up more airtime on earnings calls in August, and the tone on the variant has been fairly mixed. (2) Second, we’re seeing more pronounced signs of stress in the high-frequency indicators that we track. (3) Third, for the most part, the US equity market has remained forward-looking, focusing not on the impacts of the latest surge but rather on the continuation of the recovery thereafter.

A Rock and a Hard Place, and The Good Stuff In Between Aug 09, 2021

This week in the podcast we run

through our latest thoughts on positioning within the US equity market with an

eye on longer-term trends through 2022, which has been the focus of our

conversations with investors in recent weeks. The big things you need to know:

1) We expect the Growth/Value trade to stay choppy through 2022. Once current

pressures on the Value trade resolve (primarily COVID and growth concerns), we

see another significant outperformance trade in Value in the intermediate term,

but suspect that will end up being the time to exit the trade. (2) As we start

to get ready for 2022 outlook discussions, we are getting more balanced between

Value/Cyclicals and Growth in our S&P 500 sector overweights. Our

Financials and Energy overweights remain, but we are lowering Materials from

overweight to market weight. We are also lifting Tech to overweight from market

weight. (3) High quality leadership has returned to the US equity market,

supporting our upgrade of Large Cap Tech.

The Four New Things We Learned In Week Three of 2Q21 Reporting Season Aug 02, 2021

This week in the podcast

(1) Most of the major trends and themes for 2Q reporting season that we’ve been

highlighting over the past few weeks remained intact. (2) We learned four new,

important things last week on slowing growth rates, supply chains, labor, and

COVID/mobility. (3) It’s not unusual for slowing growth rates to trip up the

stock market temporarily following recessions. (4) The high-frequency data we

track suggest mobility trends remain constructive.

A Better Overall Tone, But Key Challenges Remain Jul 26, 2021

This week in the podcast we take a

look at what we learned in the second full week of 2Q21 reporting season. Three

big things you need to know: First, the overall tone from management teams

improved in week 2 relative to week 1, with a focus on the strong demand and

cash deployment backdrop, increased confidence on the 2nd half, and COVID

concerns toned down. Second, while we generally sensed a better tone regarding

the ability of companies to manage through margin pressures, we also came away

with the impression that management teams are inclined to see general

inflationary and supply chain pressures as enduring for a bit longer. Third,

while upward earnings revisions are still happening, we continue to see a

softening in earnings sentiment driven by deterioration in Financials, Consumer

Staples, Health Care, and Utilities specifically and Value, Defensives, and

Cyclicals more broadly.

Financials Fumble, COVID Concerns Creep Back In Jul 19, 2021

This week in the podcast, we take a

look at what we learned from week 1 of 2Q21 reporting season. The two big

things you need to know: (1) 2Q21 reporting season got off to a sour start, but

it’s too early to gauge the overall tone, as last week’s reporters were mostly

Financials, and their weak stock price reactions, stand in contrast to the more

positive reactions seen by the early reporters. (2) COVID discussions haven’t

disappeared from management commentary which have highlighted ongoing vigilance

on the Delta variant. This may contribute to additional pressure on the

reflation trade in the near term, as the Large/Small, Growth/Value, and

Secular/Cyclical trades have started to move in tandem with domestic case

counts again.

2Q21 Earnings Preview Jul 12, 2021

This week in the podcast, we

run through our thoughts on 2Q21 reporting season, which gets underway this

week. Three big things you need to know: (1) 2Q21 reporting season is off

to a good start, based on the stats of the early reporters. (2) An important

shift in earnings sentiment has occurred, with Cyclicals, Value, and Financials

weakening. (3) Our recent analyst and investor surveys suggest inflation

impacts will be one of the key issues to monitor.

The Mood of the Market Is Fading Optimism Jul 07, 2021

This week in the podcast, we run

through the results of our 2Q21 US equity investor survey, conducted June 22nd

– 29th. The respondents were mostly US focused and based portfolio managers.

All were institutional investors. The big things you need to know: Overall, US

equity investors remained optimistic, though optimism did fade a bit relative

to our late March survey. Cash deployment and economic outlooks are strong,

though valuations, margins, inflation, COVID variants, the Fed, and Washington

policy are all weighing on sentiment. Interest in reflation trades is also

fading.

A Potential Expiration Date Jul 01, 2021

This week in the podcast, we

take a look at the historical playbook around Fed tapering and hiking, and what

it means for our US equity market outlook. We’ve moved into the flattening camp

on multiples, as Fed rate hikes are historically a headwind for forward P/E’s.

While we don’t think these trades are done playing out yet, we think Fed

tapering and rate hikes, and the cooling off of economic growth that’s already

anticipated for 2023, put a potential expiration date on the rotation into

Value, Cyclicals, and Small Caps.

The View From The Trenches Looks Pretty Good Jun 23, 2021

This week in the podcast, we discuss the results

of our June survey of RBC’s equity analysts. The big things you need to know:

(1) Outlooks for performance over the next 6-12 months remain constructive,

driven by optimistic views on fundamentals and cash deployment. (2) The results

a guide for the best ways to get exposure in three distinct parts of the US

equity market - Financials & Energy within Cyclicals, Information

Technology within Secular Growth, Health Care & Utilities within Classic

Defense. (3) The survey helps to set the stage for what we expect to be an

important earnings season, with roughly half of our analysts saying it is

unclear to what extent inflationary impacts are baked into company guidance

and/or consensus estimates.

What We Think The 10 Year Has Been Telling Us Jun 20, 2021

This week in the podcast, we recap our thoughts on how we’d play defense in the very near-term, if short-term macro indicators like ISM are in the process of making a peak – something we think the decline in 10 year yields throughout most of 2Q may have been signaling. Our bottom line – we worry a peak in major macro indicators like ISM could spark a pullback in the market or a pause in the rotation into Value and Cyclicals. We think there’s a case for adding some exposure to Classically Defensive sectors in the near-term. But longer-term we still like Cyclicals.

Top Stocks Aren’t Having a Good Year, But Long-Only Fund Managers Are Jun 09, 2021

This week in the podcast, Lori takes a deep dive into the holdings of actively managed Large and Small Cap funds, based on their 1Q filings. Though the data lags, it usually provides important insights into active manager positioning and sentiment, and this time it was actually quite insightful. The big thing you need to know – the favorite stocks of long-only managers in both Small Cap and Large Cap aren’t performing very well in 2021, but it doesn’t really matter as the funds themselves are still having a very good year, due to good stock picking in 1Q and some favorable sector exposures.

Early Mid-Year Check In Jun 04, 2021

This week in the podcast, Lori does a slightly early, mid-year check in on her outlook for the US equity market. Three big things you need to know: First, we’re sticking with our market call and 4325 target on the S&P 500. Slipping sentiment and peaking economic and earnings indicators may contribute to a brief pullback at some point during the 2nd half, but the longer-term economic outlook remains constructive. Second, we remain neutral US equities relative to non-US equities, but are admittedly feeling better about the latter. Third, while we wouldn’t be surprised to see Small Cap underperform in a broader market pullback, we continue to see considerable opportunity in Small Caps longer-term and are maintaining our bias to Small over Large.

The Hot Dogs Are Cold May 25, 2021

This week in the podcast, Lori discusses her takeaways from last week’s release of 1Q21 13fs for major hedge funds. The big thing you need to know: the most popular Large Cap stocks in hedge funds in terms of the Dollar value owned, which we call the Hot Dogs, have continued to underperform in 2021 in a significant way. At the sector level, big reversals in performance have been seen for the most popular hedge funds stocks in the Communication Services, Consumer Discretionary, and Tech sectors, with the most popular names lagging this year. But Energy has bucked the trend as the most popular hedge fund names in the sector have outperformed. Lori also discusses what surprised her about positioning in Financials among hedge funds.

Taking Tech’s Temperature May 19, 2021

In this week’s podcast, Lori discusses why she believes the unwind in big Tech isn’t done yet. She cites five reasons: (1) positioning in Nasdaq futures hasn’t bottomed out; (2) valuations have improved but aren’t compelling; (3) the sector tends to underperform when inflation expectations are rising; (4) earnings revisions trends appear to be peaking; and (5) ETF flows to the sector have dried up.

A Little More Room May 07, 2021

This week in the podcast, Lori discusses the latest changes to her S&P 500 forecasts. Earlier this week, we lifted our 2021 S&P 500 price target to 4,325, up from 4,100. We also raised our 2021 and 2022 S&P 500 EPS forecasts, baking in a moderate increase in the corporate tax rate to the latter. Our bottom line: we see a little more room for stocks to climb higher this year, but we also continue to expect a pullback/heightened volatility before the year is done, capping that upside.

The Big Problem on the Earnings Front Apr 30, 2021

This week in the podcast Lori discusses where we are in the earnings cycle, and what it means for stock prices going forward. The big thing you need to know: while 2021 S&P 500 EPS is tracking better than expected, we think expectations for decelerating EPS growth in the back half of 2021 are a major hurdle for the stock market, and help make the case for a short-term pullback, or volatility, in the US equity market in the months ahead.

ESG Flows Have Eased Recently, Valuation Opportunities in ESG Leaders & REITs ESG Momentum Apr 22, 2021

This week in the podcast, guest host Sara Mahaffy, RBC’s ESG Strategist, runs through the team’s latest work on ESG fund flows, valuations, and ESG momentum. Following a strong surge in 2020, ESG fund flows have eased back in February and March, keeping the team on guard for better valuation opportunities in ESG leaders. In addition, we found that the REITs sector moved up the rankings in our ESG momentum analysis (which looks at sectors seeing the most recent improvement in ESG) this April.

Early Thoughts On What Biden’s Tax Hikes Mean For Stocks Apr 15, 2021

This week in the podcast, we run through our initial thoughts on Biden’s plans to raise corporate taxes. We think Trump’s tax cuts played an important role in fueling strong equity market returns in 2017 through 2019, and our work suggests Large Cap Growth was one of the biggest beneficiaries. We also believe that Biden’s proposal to raise corporate taxes to fund his infrastructure bill has been impacting rotation within the US equity market recently. Investors have been worrying about higher corporate taxes all year, and the stocks that were the biggest beneficiaries of Trump’s tax reform have stumbled recently, telling us risks are getting baked in now. Run time: 6 minutes.

Dissecting The Slightly Less Optimistic Mood of the Market Apr 08, 2021

In this edition, Lori reviews the results of her latest US equity investor survey. The big thing you need to know: The mood of the market is slightly less optimistic than our December survey. Slightly better valuation assessments and improved outlooks for EPS and the US economy are a big part of the reason why investors remain optimistic. The reasons why investors reined in their enthusiasm a bit include concerns about the timeline for the return to normality, the new COVID variants, the stronger dollar, inflation, fiscal policy, and the Fed.

Dollar Difficulties in the Distance Mar 31, 2021

In this edition, Lori tackles the topic of the US Dollar, and what its recent strengthening means for the US equity market. The consensus view coming into 2021 was for the US Dollar to weaken, but that may be starting to reverse. A stronger Dollar is mostly a negative for the US equity market in terms of performance, earnings revisions, and margins. But sector impacts aren’t uniform, and it’s a challenge for the stock market that should be thought of as looming in the distance rather than one that’s likely to hit stocks imminently.

The Key To The Great Debate On Value vs. Growth Mar 26, 2021

In this edition, Lori gives her take on the Growth vs. Value debate that has become a key underpinning of positioning within the US equity market. She reiterates her preference for Value over Growth in 2021 due to: a better cash deployment profile in Value, stronger earnings momentum in Value, a greater positioning problem in Growth, extended Growth valuations relative to Value, Value’s status in the market as a reflation trade, and surging ETF flows for Value. Lori acknowledges that these are all intermediate term reasons to prefer Value. Ultimately, she believes the ability of Value to continue leading longer term depends on whether the economy can sustain above-trend GDP growth in 2022 and beyond.

The Bottom Up Outlook For Stocks Remains Positive Mar 19, 2021

In this edition, we discuss the results of our March 2021 survey of RBC’s equity analysts, in which we asked them to quantify their outlooks for their industries on 6 issues – performance, cash deployment, margins, valuations, fundamentals, and policy. Overall, our analysts are optimistic on performance, cash deployment, fundamentals, and margins. They are less enthused about the state of valuations and the Washington policy backdrop, and are split on the impact of inflation. Our Financials team stood out for being the most constructive on several questions, supporting our ongoing overweight on the sector. Our Consumer Staples team stood out for seeing a major, positive change in view since the start of the year, supporting our upgrade of the sector to market weight.

Why We’re Intrigued With Mid Caps Mar 12, 2021

In this edition, we discuss three reasons why we believe Mid Caps offer opportunity within the US equity market: (1) greater exposure to cyclicals than Tech/Internet/Media/Telecom, (2) plenty of runways on positioning, and (3) attractive valuations relative to Large Caps.

Disclaimer: https://www.rbccm.com/en/policies-disclaimers.page

Why We Still Like Financials Mar 04, 2021

In this edition, we discuss why we remain overweight in Financials sector, a key part of the reflation trade. Among other reasons, we like the sector’s cash deployment, earnings, and valuation profile. We also discuss the favorable macro tailwinds in place.

Disclaimer: https://www.rbccm.com/en/policies-disclaimers.page

Why We Like Small Caps Longer Term, But Are Staying Neutral On Them Near Term Aug 14, 2020

In this edition, Lori discusses her thoughts on the outlook for Small Cap stocks in the US. Three big things you need to know: (1) Lori sees greater opportunity in Small Caps than Large caps on a long-term, 3-5 year view, but prefers a more neutral stance on the two size segments on a 6-12 month time horizon. (2) In terms of stock price performance, Lori thinks Small Caps may benefit more in the short-term from a Trump re-election than a Biden win in this fall’s Presidential election. (3) Lori’s work finds that individual investors on the Robinhood platform have been more engaged with Large Caps and Nasdaq stocks than Small Cap stocks, helping to explain why Small Caps haven’t seen consistent outperformance since the mid-March low in the US equity market.

Disclaimer:https://www.rbccm.com/en/policies-disclaimers.page

What We’ve Learned So Far In 2Q20 Reporting Season Aug 06, 2020

In this edition, Lori discusses her takeaways from 2Q20 earnings season so far. She and her team recently did a deep dive into the trends in beats rates, forward-looking revisions, and commentary on earnings calls for the 63% of S&P 500 companies that had reported 2Q results as of Friday, July 31^st. Three big things you need to know: (1) Similar to May and June economic data, 2Q earnings have been less bad than feared, but the reaction in the stock market has been very mixed – up until the big Tech results came in at the end of the month. (2) The rate of upward EPS estimate revisions (earnings sentiment) has continue to surge, but we are on guard for a peak before too long. (3) Among the major sectors, Consumer Staples and Tech have been positive standouts, while Energy and REITs have been negative standouts.

Disclaimer:https://www.rbccm.com/en/policies-disclaimers.page

The Biden Playbook For US Equities Jul 29, 2020

In this edition, Lori discusses her thoughts on the 2020 Presidential Election in the US, and specifically how investors should be positioned for a Biden win. She’s put togethera sector playbook based on the policy leanings of the Biden campaign and her July survey of RBC Capital Markets’ research analysts. She also discusses why Biden’s proposed increase in the corporate tax rate is a key challenge for the stock market. Finally, she discusses why she views the election as a mild, negative catalyst for US equities in the second half of 2020 and risks to her view.

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2nd Half Outlook For US Equities Jul 22, 2020

In this edition, Lori discusses her outlook for the S&P 500 in the 2nd half of 2020. She’s lifted her year-end 2020 S&P 500 target from 2750 to 2900, but there’s no change in her overall message – she continues to expect choppy markets in the back half of the year and see downside risk from current levels. Lori discusses her latest thoughts on valuation, sentiment, earnings, and seasonality.

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Defensive Backdrop To Earnings Jul 14, 2020

In this edition, Lori discusses updates her thoughts on some of the more important daily and weekly indicators that she tracks.Four big things she’s learned over the last week: (1) The S&P 500 has been surging, but defensive undertones remain. (2) A pivotal earnings season is underway, in which we see risk of downward revisions. (3) Signs of stress remain in short-term indicators. (4) Stocks are starting to trade more in sync with Biden’s chances of winning in November than Trump’s.

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Signs of Stress Jul 01, 2020

In this edition, Lori discusses the latest developments in some of the more important daily and weekly indicators that she tracks. Two big things she’s learned over the last week: (1) bearishness continued to build among both institutional and individual investors, based on her review of the latest updates from CFTC on asset manager positioning in US equity futures, and the weekly individual investor survey from AAII. Second, she sees evidence that worsening virus trends may be starting to adversely impact consumer and small business behavior, putting the rebound in the S&P 500 at risk.

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Why US Equity Investors Are Getting More Bearish Jun 26, 2020

In this edition, Lori discusses the results of her latest quarterly US equity investor survey, which was conducted June 15^th – 22^nd and included mostly institutional US focused equity investors. There are two key findings. First, bearish outlooks on the US equity market are rising, while bullish views are retreating. Second, the survey identified several things behind the increase in bearishness – valuation concerns have risen to a new survey high, most of our participants expect a long, slow recovery, and fears of a 2nd wave of the coronavirus are high as are worries about the outcome of the 2020 election in the US.

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Economic Surprises & Lions – Oh My! Jun 22, 2020

In this edition, Lori discusses two trends she’s keeping a close eye on right now. The first is the extent to which incoming economic data is positively surprising forecasters, something that’s been an important driver of US equity market performance recently. The second is the performance of the most popular stocks in actively managed, long-only Large Cap funds (known as the Lions), which experienced an important reversal in fortunes in mid-May.

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Sizing Up Small Caps Jun 12, 2020

In this edition, Lori discusses Small Caps, both her outlook for the Russell 2000 and performance trends in the top stocks of Small Cap portfolio managers. Tactically, she expects Small Caps to continue outperforming Large Caps as long as the broader US equity market remains in rebound mode, and to underperform Large Caps in any pullbacks. In terms of the performance of Small Cap managers’ favorite stocks, she’s seen several sharp reversals in performance recently, with the most popular stocks outperforming strongly YTD, lagging in the late March – early June rebound, and a return of outperformance in Thursday’s sharp sell-off.

Our Thoughts on the China-US Trade Relationship, Civil Unrest in the US, and Earnings Jun 08, 2020

In this edition, Lori discusses the China trade war, the civil unrest in the US, and the outlook for S&P 500 earnings. The stock market has been more focused on the China trade war than the protests because the implications of the trade war are more clear. On Earnings, she highlights how the rate of upward revisions is starting to improve, helping stocks for now by feeding the “things are getting less bad” narrative. She also reiterates her view that there’s still risk lurking in 2021 estimates, which could be a problem for the market later this year.

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Our Deep Dive Into The Latest Hedge Fund Holdings May 29, 2020

In this edition, Lori discusses her takeaways on the latest hedge fund filings. The most popular stocks in hedge funds have been outperforming throughout the first half of 2020. Hedge funds ended 1Q20 with greater exposure to Health Care.

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The Big Problems We See In The Stock Market Right Now May 29, 2020

In this edition, Lori discusses her thoughts on the outlook for the S&P 500. She expects US equity markets to stay choppy in the months ahead and another drawdown. There’s no change to her year-end S&P 500 target of 2750.

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The Big Lessons of 1Q20 Reporting Season May 29, 2020

In this edition, Lori discussed her thoughts on how 1Q20 reporting season for the S&P 500 is shaping up and the key lessons learned. 2021 EPS growth forecasts have continued to slip, but still seem too aggressive. Company commentary suggests investors need to prepare for a long, slow and uneven recovery. Health Care jumps out as a bright spot.

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Lessons From Past Recoveries May 29, 2020

In this edition, Lori reviews the narratives driving the late March/April rebound in the S&P 500, plus the historical playbook for past rebounds in the stock market coming out of recessions as well as those that occurred during prior QE periods. Lori believes the rally is legitimate but fragile. So far, the composition of leadership is mostly in line with what we’ve seen in recovery trades associated with past recessions.

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