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Recapping Our Biggest Call of the Year Jun 25, 2025

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For all my Buy-side friends - If you find our research and podcast helpful, we'd appreciate your vote in Portfolio Strategy in this year's Extel/II survey (www.extelinsights.com/voting). Voting is open until Friday, June 27th.

Listen to this episode for a recap of our biggest call of the year...

Or watch my video message - https://players.brightcove.net/6021289101001/VyvCc9BZx_default/index.html?videoId=6374546435112

Solid EPS Stats, Weak Corporate Vibes, Recapping Our Middle East Read Throughs Jun 23, 2025

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The big things you need to know:

First, solid earnings stats are in place as US equity investors wait for the onset of 2Q25 reporting season.
Second, the latest Business Roundtable survey highlighted weaker corporate vibes relative to March, echoing the tone in last week’s earnings call transcripts to some degree for Russell 3000 companies, where cost containment discussions jumped out to us.
Third, we recap our views on how we’re thinking about the recent developments in the Middle East from a US equity market perspective.

The Recent Escalation in the Middle East From a US Equity Lens Jun 16, 2025

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The big things you need to know:

First, the conflict in the Middle East comes at a complicated time for the US equity market, as our sentiment and seasonality work has been suggesting stock prices could keep moving up, while our valuation/earnings and GDP analysis has been suggesting that the stock market has gotten ahead of itself. We highlight the three potential challenges we see for the US equity market from this conflict, which we are monitoring closely.
Second, we revisit our four tiers of fear framework, which helps us map out potential downside in US equities from the conflict, particularly if conditions escalate and broaden out.
Third, Energy and Materials seem most likely to outperform if the conflict results in a sustained oil price spike, while Consumer Discretionary and Communication Services seem most likely to underperform. We’re also keeping an eye on Utilities and REITs as potential, tactical outperformers.

Improved 2026 EPS Outlooks, A Less Favorable Sentiment Set Up, Seasonal Trends Jun 10, 2025

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The big things you need to know:

First, consensus expectations for 2026 are inching up for S&P 500 EPS in a broad based way, a positive data point for the stock market but a slight one.
Second, net bulls on the AAII survey have moved up sharply, and formally entered a less robust forward return environment last week.
Third, the seasonal playbook reminds us that in recent years June and July have tended to be strong for the S&P 500 but that the transition into fall has been tricky with declines often seen in the August – October time frame.

Messy Markets and Investor Pickles Jun 06, 2025

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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. In this special edition, Lori is joined by her colleagues Amy Wu Silverman (RBC Derivatives Strategist) and Ben Fisher (RBC Midwest Sales, who works closely with the firm's macro strategists). They discuss the current, messy state of the US equity market and the pickles investors are finding themselves in. Ben moderates the discussion, which was recorded live at the RBC EPIC Conference in NYC on June 4th, 2025.

The four big topics covered:

First, where Lori and Amy see US equity markets and volatility headed. Lori describes herself as neutral and reviews her new YE 2025 S&P 500 target of 5,730, which is driven by her valuation and earnings work and a macro backdrop that looks a bit better than it did in early April, but not as strong as it was in January. Amy highlights how both the right and left tails have gotten fatter recently, and runs through what she sees as the potential catalysts for a pick-up in volatility.
Second, Amy and Lori's latest thoughts on investor sentiment and positioning. Amy highlights differences in recent behavior from retail investors (who were buying the dip) and institutional investors (who were more cautious and engaged in derisking and degrossing). She points out that hedging on the institutional side has not been short term in nature, due to uncertainty about when the hard data will deteriorate. Meanwhile, Lori notes that many of the investors she speaks with are in a holding pattern, waiting to see what happens next, and walks through a number of key questions that investors will be looking for the answers to in the next reporting season. She also highlights the messiness of recent investor sentiment and positioning data, which fell but never completely collapsed for institutional investors and has been rebounding rapidly after collapsing for retail investors.
Third, Lori and Amy's thoughts on some of the biggest positioning trades in equities of late. Lori highlights why she sees the tug of war between mega cap Growth and Value continuing, the intersection of the mega cap Growth trade and US exceptionalism, and how tariffs opened a door to curiosity about regions outside the US that will be difficult to close. Meanwhile, Amy highlights increased activity regarding trades on China and Emerging Markets and how she believes that her clients are the most Euro curious she's seen in quite some time.
Fourth, thoughts regarding the impact of the bond market on US equities. Lori runs through why 5% on 10-year yields would be a stumbling block for US equity market performance, while Amy highlights the potential for the inverse correlation between bonds and equities to break down as a key risk to monitor.

Tweaking Our Target Jun 02, 2025

Show notes

The big things you need to know:

First, we are modestly revising our YE 2025 S&P 500 price target, taking it up 3% to 5,730 from 5,550. Our valuation and earnings models drive this number.
Second, we view sentiment as the main risk to our call. Even though it’s been melting up in recent weeks, our sentiment model (based on AAII net bulls) is still the most constructive one in our price target toolkit, and our analysis of S&P 500 moves off the lows of the major post GFC drawdowns indicates that the index could have more room to run through year-end 2025.
Third, we review the case for and against Small Caps, which were in focus in our meetings last week. We remain neutral as Small Caps have been derisked to a greater degree than Large Caps, making an underweight unwise, but the conditions for outperformance seem elusive.

Updating Our 2025 S&P 500 EPS & Valuation Models, The Market's Bad Mood May 19, 2025

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The big things you need to know:

First, the S&P 500 EPS backdrop has stabilized, but we still anticipate further downward revisions for 2025 S&P 500 EPS. After a preliminary model refresh, we are maintaining our 2025 S&P 500 EPS forecast of $258, which is below the bottom-up consensus of $265.
Second, we’ve updated our S&P 500 valuation model to reflect updated RBC house views on key macro variables like interest rates and inflation. It suggests that last week’s gap up in the stock market was largely deserved, but that upside from here may be limited without another major step-up improvement in broader macro expectations.
Third, we run through our thoughts on the Moody’s US debt downgrade from a US equity market perspective.

A Little Less Conversation About Tariffs May 05, 2025

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The big things you need to know:

First, it was another week of stabilization on the earnings stats we track, helping to support the recent stabilization in equity market pricing.
Second, there was a little less conversation about tariffs in last week’s earnings calls, which left some additional room for discussions on the health of the consumer and the impacts of non-tariff policy changes.
Third, in our other weekly updates, the thing that jumps out is that when we bake in current consensus assumptions on key macro variables and bottom-up EPS for 2025, the S&P 500 ended the week roughly in line with where our model says fair value for the index should be at year-end.

Drinking From A Firehose of Earnings Apr 28, 2025

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The big things you need to know:

First, earnings sentiment has stabilized a bit, helping stock prices find some footing for the moment.
Second, we run through our thoughts on what we learned from last week’s earnings calls. We think there are two different perspectives at play on the consumer, which may be adding to investor confusion. We exited the week seeing managing tariff impacts as a work in progress, but with a greater appreciation of the work that has been done.

The Fog of Tariffs Apr 22, 2025

Show notes

The big things you need to know:

First, earnings sentiment is at an important crossroads, with the rate of upward EPS estimate revisions having fallen to 30%.
Second, what we read in S&P 500 earnings call transcripts last week keeps us in the camp that recession is not a foregone conclusion, makes us concerned that any adverse impacts from tariffs may be felt a little later in the year or even next year, and pushes us toward the idea that the consumer is holding up but still hasn’t been unscathed.
Third, the idea that investors are rotating out of the US assets into other geographies is supported by recent funds flows data.

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