RBC's Markets in Motion

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.

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.

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.

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.

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 StocksRBC’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 AttentionWe 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 manufact

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.

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.

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.

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.

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.

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.

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.

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.

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.

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: 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.

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.

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.

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).

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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?

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).

Three big things youneed 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Today inthe podcast, we take a deep dive into the outlook for the US equity market fromthe S&P 500 all the way down to Small Caps. Three big things you need toknow: 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 becomecloudier and we don’t think the pause in the S&P 500 rally that we calledfor in early August is done yet. Second, we continue to believe that Large CapGrowth is in need of a tactical correction, but we also acknowledge itslonger-term fundamental appeal which is why we think the leadership transitionhas been so tough. Third, Small Caps remain intriguing from a valuation andearnings perspective, but have been dragged down by balance sheet concerns,rising bond yields, and lingering economic angst.

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.

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.

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.

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.

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.

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.

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.

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.