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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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