Markets will have a good year but still lots of angst in markets, says RBC's Lori Calvasina

Becky Quick (Anchor) 00:00.110

yes right now in the markets is laurie calvesina she is RBC capital markets head of US equity strategy research

Becky Quick (Anchor) 00:07.710

we're already looking at twenty twenty six things have been pretty great this year for the markets even though it was kind of a scary ride up you had the april situation with the tariffs that spooked everybody and you know it's been kind of a fought upside battle since then

Becky Quick (Anchor) 00:22.310

right

Lori Calvasina (Head of U.S. Equity Research) 00:22.750

it's been a rollercoaster i mean and while roller coasters can often be fun for some people not for me frankly you don't necessarily feel great when you're you're sort of sitting at the top of for the the next hill and it's interesting

Becky Quick (Anchor) 00:33.630

where you think we are right now

Lori Calvasina (Head of U.S. Equity Research) 00:35.030

i think we're gonna have a good year i mean frankly this five percent drawdown we had in the you know a month or so ago i wish it had been a little bit more just to get a little bit more of the froth out there's still a lot of angst out there i keep using the word well we have

Lori Calvasina (Head of U.S. Equity Research) 00:48.150

to be vigilant on this we have to be vigilant on that but at the end of the day i do think we're gonna have a goodyear next year so we've got a twelve month price target on the S and P of seventy seven fifty

Lori Calvasina (Head of U.S. Equity Research) 00:57.670

at at the time we put that out right around thanksgiving i think december first we put it out it was a fourteen percent gain right so we've rallied back that return has come down a bit but as i talked to people i keep saying look you know we could still have some indigestion

Lori Calvasina (Head of U.S. Equity Research) 01:11.750

even getting a five to ten percent drawdown at some point next year i still think we can make our seventy seven fifty number our modeling goes all the way from seventy two hundred on the more conserv event when we bake in GDP forecasts when we do our valuation earnings work we

Lori Calvasina (Head of U.S. Equity Research) 01:24.230

can get you all the way up to eight thousand

Becky Quick (Anchor) 01:25.710

well that's what i was going to say earnings just watching the earnings that have been coming in and what you expect from here

Lori Calvasina (Head of U.S. Equity Research) 01:31.670

so the bottom up consensus which frankly i think is the best way to do it because i think you have to do this work stock by stock macro wise we can't tell you what's going to happen in tech margins or biotech margins and the reality is thirteen percent earnings growth is not

Lori Calvasina (Head of U.S. Equity Research) 01:44.310

that heroic a fourteen percent return right on top of that that's actually telling you there's not going to be a lot of multiple expansion right that we're gonna really be queuing off this earnings environment and you know we're still seeing some good numbers if you look at the

Lori Calvasina (Head of U.S. Equity Research) 01:57.110

rates of upward revisions they're not as strong as they were over the summer but we're still getting some healthy moves there and

Lori Calvasina (Head of U.S. Equity Research) 02:02.510

what's really interesting becky there's so much angst on this AI trade but people are saying i want to look at cheap sectors i want to look at where AI can enhance productivity down the road so let's maybe talk about things like healthcare

Lori Calvasina (Head of U.S. Equity Research) 02:14.790

so people are nervous they're in risk management mode but they're also thinking constructively

Becky Quick (Anchor) 02:19.520

the AI returns for all of these other sectors does that actually pay off in twenty twenty six does it lead straight to the bottom line with earnings i think

Lori Calvasina (Head of U.S. Equity Research) 02:29.590

that we are still very early days i was pleasantly surprised towards the end of this last reporting season that i was actually seeing a few companies in the consumer space actually put out some hard numbers on say you know we had this fulfillment center we used AI on that we

Lori Calvasina (Head of U.S. Equity Research) 02:43.830

increased productivity by thirty percent again very early days but at least we're starting to get some tangible pointers from companies

Becky Quick (Anchor) 02:51.150

where which consumer companies were the ones that kind of jumped out with that we're i can't

Lori Calvasina (Head of U.S. Equity Research) 02:54.990

hear i can't get into individual companies but it was more on sort of the retail side OK and what was interesting is that my team and i we read transcripts really really closely and as we've gone back over the past years you know we've seen things like you know a chatbot right

Lori Calvasina (Head of U.S. Equity Research) 03:08.270

from like a travel company you know things that frankly felt a little bit underwhelming to us

Lori Calvasina (Head of U.S. Equity Research) 03:14.230

you know as we looked kind of in the middle of the year we felt like business services type companies you know that really had kind of deep roots in the tech space were giving us some tangible examples even if they weren't giving specific numbers you

Becky Quick (Anchor) 03:26.190

mean like replacing call centers type of things replacing

Lori Calvasina (Head of U.S. Equity Research) 03:30.230

call centers i mean i will tell you we see a lot of references to productivity 's efficiencies those sorts of things but it does feel to me like companies that are a little bit more deeper in the tech world even if they're not tech companies per se have done a better job of sort

Lori Calvasina (Head of U.S. Equity Research) 03:43.870

of sounding real to be honest when they've had you know some of these impacts

Becky Quick (Anchor) 03:47.470

yeah i mean it's it's one thing to say AI seventy two times on a conference call it's another thing to lay out at a clear cut example where you are seeing efficiency and

Lori Calvasina (Head of U.S. Equity Research) 03:57.510

look i think that's part of the jitters right i spend probably more of my time i'm talking to long only investors and hedge funds i have a healthy amount of the latter but as i went through the summer you know i felt like not only we're long only investors you know sort of you

Lori Calvasina (Head of U.S. Equity Research) 04:10.230

know we were sort of talking about what we were hearing on the earnings calls and the companies but also just in terms of their own day to day use cases right and i think the

Lori Calvasina (Head of U.S. Equity Research) 04:17.510

idea that a lot of this is still sort of in an experimental phase we're still figuring out the use cases i think a lot of people in the investment community have been living that in their day-to-day life and so then when you also you know sort of translate that to the returns

Lori Calvasina (Head of U.S. Equity Research) 04:30.110

you're from companies you know this idea that this was all going to be transformational tomorrow i just think for a lot of companies and industries it hasn't panned out yet some it has right you know it's it's very hard to draw a broad brush

Lori Calvasina (Head of U.S. Equity Research) 04:41.870

but there was a lot of impatience with this trade from early on and i think what investors are learning now is you have to be a little bit more patient and give it a little bit

Becky Quick (Anchor) 04:49.990

more time very quickly what could go wrong in twenty twenty six