In Lori Calvasina's role as Head of US Equity Strategy at RBC Capital Markets, assessing the interaction between macro variables like rates with top-down factors like the equity market multiple is critical. But important as well is an evaluation of markets from the bottoms up. And here, she not only seeks to pull together the views of colleagues doing strategy work in sector verticals, but also to actually read earning transcripts during reporting season to get a sense of what companies are saying. Her broad assessment of the outlook for corporate America is generally optimistic as she sees companies having come out of multiple stress exercises - trade wars, the Covid shock, and the inflation and monetary policy response in the Pandemic's aftermath among them - with a stronger defensive plan. Companies are harnessing technology and managing costs more effectively, leaving them less likely to be forced to reduce headcount. The result is a consumer holding up quite well.
Our discussion touches on the Mag7 and how today's top-heavy portion of the market is similar and different to the highfliers of the tech bubble. For Lori, the valuation premium for names like NVDA and other mega cap tech stocks is justified by the premium of earnings growth they've been able to consistently deliver. We explore the impact of higher rates on the market's multiple and the relative performance of sectors as rates rise or fall. She likes energy, both for its high dividend yield, its strong relative performance as rates rise and the potential for a geopolitical tailwind. On this last front, asked about the market risks that she worries about, it is uncertainty on the global political front along with the US election. She also cites sentiment that may be too bullish and positioning that appears stretched. Lastly, we touch on Lori's recent recognition as one of Barron's Top 100 Most Influential Women in US Finance. Asked about industry efforts to empower female careers in finance, she's optimistic, arguing that it's critical to have not just a mentor but a sponsor as well to push you to the next level.
I hope you enjoy this episode of the Alpha Exchange, my conversation with Lori Calvasina.
