RBC's Markets in Motion RBC Capital Markets
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Our regular podcast from Lori Calvasina, Head of US Equity Strategy, that brings a fresh perspective and nuanced, data driven view on the forces shaping U.S. equity markets.
Disclaimer: https://www.rbccm.com/en/policies-disclaimers.page
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Right Back Where We Started From
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).
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Earnings Ending Up Fine with a Twist, Bulls Bounce Back
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.
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Updates on Reporting Season, Sentiment, Small Caps
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).
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Analyst Survey Results Point To Optimism & Rotation, US Sector Call Changes
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.
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Sentiment, Companies Beating Consensus, and Growth Take a Hit
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.
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Seven Things We’re Thinking About Right Now
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.