RBC's Lori Calvasina Talks Markets for H2 2026

Summary

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Bloomberg Talks: RBC's Lori Calvasina Talks Markets for H2 2026

Host: Bloomberg
Guest: Lori Calvasina, RBC Capital Markets
Date: July 6, 2026

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Episode Overview

This episode features Lori Calvasina, Head of U.S. Equity Strategy at RBC Capital Markets. Lori shares her outlook for the U.S. equity markets in the second half of 2026, discusses the impact of AI as an investment theme, details her S&P 500 models, and highlights what’s screening well in today’s environment. She also offers insights from key business leader surveys and reflects on sector rotation and consumer sentiment. The tone is informal, data-driven, and rich with practical examples, especially relevant for investors seeking perspective on current and emerging trends.

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Key Discussion Points & Insights

1. Market Outlook & Current Themes ([01:15]–[02:30])

• No Major Change Since Mid-Year Outlook:
  • Lori explains that her mid-year perspective remains intact, with “a list of things that… could present short term tactical risks” such as upcoming midterm elections and ongoing uncertainty about interest rates.
  • She projects any potential downturn would likely be limited to “a 5 to 10% drawdown at worst.”
• Earnings Strength vs. Interest Rates:
  • Despite mixed predictions regarding interest rate moves, “the earnings strength, the earnings tailwind, is offsetting pressures on the P/E from the trickier rates and inflation environment.”
• New S&P 500 Target:
  • "We upped our target a little bit to 8,150. Healthy, not heroic." ([01:57])
  • The target reflects her confidence in the market’s earnings capacity even as valuation pressures persist.

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2. AI as an Investment Theme ([02:30]–[04:14])

• Evolution of the AI Trade:
  • AI began as a “Mag 7” (big tech) story, expanded to semiconductors, and is now broadening:
    "The AI trade was really sort of broadening out this year. And then the semis were front and center and we're kind of at peak revisions there on earnings." ([02:43])
• Beyond Big Tech:
  • Investors are seeking new “end user” plays for AI, and the trend will intensify:
    • “Increasingly investors are going to be looking for how AI affects, you know, kind of the end users. And we’re still in the early stages of that right now.” ([03:47])
• Industry Example:
  • From RBC's energy conference: energy companies discussed “how they're helping power data centers," highlighting non-tech beneficiaries of the AI build-out. ([03:47])

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3. S&P 500 Target Methodology ([04:14]–[05:46])

• Not Just Extrapolation:
  • Contrary to claims, Lori’s team uses five distinct models (including GDP tests, sentiment models, and valuation-earnings frameworks). Target ranges run from 7,777 (for flat GDP) to over 8,300 (per more optimistic models):
    • "[8,150] is basically the median and average and approximation of those five different models." ([04:48])
• Assumptions:
  • 12-month forward target using consensus earnings (shaved by 5%), a P/E with inflation at 3%, and modest Fed tightening.
  • Core view: “Earnings tailwinds can still offset… those headwinds from the P/E compression in the year ahead.” ([05:46])

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4. Business Leader Surveys & Corporate Optimism ([05:46]–[07:09])

• The Duke CFO Survey’s Insights:
  • Lori views this as a “fun survey” and notes a "very wide" gap post-Covid between optimism on individual companies versus the economy as a whole:
    • “What you've seen consistently in the post Covid world is there's a gap between companies' optimism about their own company versus the economy.” ([05:55])
    • This gap signals “the resiliency of corporate America and their faith in their ability to manage, manage through.” ([06:11])
• Survey Preference:
  • While various surveys are useful (Business Roundtable, Conference Board), Lori favors the CFO perspective:
    • “Maybe I'm just a data nerd. Right. So I'm partial to the people who are crunching all the numbers…” ([06:46])
    • Paul adds: “Those are the ones allocating the capital, and they decide…what gets funded…” ([07:04])

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5. Sector View & Rotation ([07:15]–[08:08])

• Financials Stand Out:
  • The financial sector "still looks interesting," with reasonable valuations, positive earnings revisions, and strong linkage to stabilizing consumer sentiment.
  • “It looks to me like those indices [consumer confidence] are trying to stabilize. So we've been increasingly talking to clients about if we have sort of seen the lows on consumer confidence or sentiment and get a turnaround, [financials] looks like a sector that should benefit from that.”
• Rotation Appeal:
  • Financials are “one of the more reasonably valued areas of the rotation trade.” ([07:22])

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Memorable Quotes & Notable Moments

• On market resilience:

  “We still think that the earnings strength, the earnings tailwind, is offsetting pressures on the P/E from the trickier rates and inflation environment.”
  — Lori Calvasina ([01:57])

• On the broadening of AI investment:

  “Increasingly investors are going to be looking for how AI affects... the end users. And we're still in the early stages of that right now.”
  — Lori Calvasina ([03:47])

• S&P 500 target methodology:

  “8,150, you know it's a 12 month target, but it's basically the median and average and approximation of... five different models.”
  — Lori Calvasina ([04:48])

• On business survey data:

  “Maybe I'm just a data nerd. Right. So I'm partial to the people who are crunching all the numbers...”
  — Lori Calvasina ([06:46])

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Timestamps for Key Segments

• Market Outlook and Risks: [01:15]–[02:30]
• AI as a Market Theme: [02:30]–[04:14]
• S&P 500 Target Modeling: [04:14]–[05:46]
• Business Leader Surveys: [05:46]–[07:09]
• Sector Screening and Rotation: [07:15]–[08:08]

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Summary Takeaways

• Lori Calvasina remains constructive on U.S. equities, setting a 12-month S&P 500 target of 8,150, grounded in multiple models and current market dynamics.
• The AI investment theme continues to broaden, moving beyond chips to new industry and end-user beneficiaries.
• Financials are getting renewed interest due to their valuations and linkage with consumer sentiment, suggesting potential for rotation.
• Business optimism among CFOs remains higher for individual firms than for the economy at large, underscoring corporate resilience in a complex macro landscape.

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Transcript

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[Host/Interviewer]

Laurie Covid loves when I do foreign exchange here, Space X Bid. I mean nobody's talking. It's like old news. It is, but there was 162 and out to 163. Joining us from RBC after an extra incredible weekend. Lori Calvert survived the weekend. Did you try to take one hour off this weekend?

[Lori Calvert]

I did. You know, I went to my in laws yesterday. My husband took the kids to the pool and I fell asleep on the couch. So I got my nap.

[Host/Interviewer]

What does that sound like? The surveillance nap? The Royal bank of Canada nap on the 4th of July? How do you rewrite your June 30th essay of two weeks ago?

[Lori Calvert]

So look, there's nothing that's really changed since our mid year outlook. You know, I think we still have this list of things that we think could present short term tactical risks to the market, but we view those as things that might generate something like a 5 to 10% drawdown at worst. You know, those are things like the midterm elections later this year. I know. You know, there's a lot of stories starting to percolate there and interest from clients starting to percolate as well. At some point we'll deal with 2027 earnings growth expectations. We're not there yet. We're still sort of sorting through 2026, but that's something to keep on your radar as well. And it feels like interest rate fears have eased back a little bit. But that's something also to keep on our radar. I know there's just a whole range of outcomes predicted around the street right now. Some people looking for cuts, some people looking for hikes. But we do sort of keep that hike risk on the radar. But you know, Tom, we really with the price target, we try to be longer term. We recast it this year from a December 31st number to a 12 month forward number. We update it once a month. We did a little bit later last month than we probably should have, but we had a number of events to get through and so we upped our target a little bit to 8,150. Healthy, not heroic. We still Think that the earnings strength, the earnings tailwind, is offsetting pressures on the P E from the trickier rates and inflation environment. So no real change.

[Paul]

What is the AI theme in your work these days? I guess we all started our own investing by just buying the chips, which is still a way to go, no doubt. But is there other ways to play AI that you and your team are thinking about?

[Lori Calvert]

So, you know, I think it started out as sort of a Mag 7 type story. Right. And then we saw in the earnings data that the AI trade was really sort of broadening out this year. And then the semis were front and center and we're kind of at peak revisions there on earnings. You've had expensive valuations, so people are looking around for other opportunities. And frankly, Paul, that's been a consistent conversation conversation for the last two months, including last week.

[Paul]

Okay.

[Lori Calvert]

And I think that, you know, we've got to sort of look at the earnings growth trajectory over the course of the next year. I think the broadening we've been seeing recently could go farther. But at the same time, I still expect that earnings story to favor the AI centric name. So we think the market will come back to that after the valuation correction has been solved. But you know, I'll give you one example. Our energy conference at RBC in early June, and we have a rock star lineup of companies. They all talked about.

[Host/Interviewer]

Stop. You mean the holy.

[Lori Calvert]

Yeah, well, Palima did our panel that I only went to the first day, but on the first day of the conference, Halena did a fantastic. Halima did a fantastic lunch break.

[Host/Interviewer]

Did her people let you speak to her?

[Lori Calvert]

They were very good friends. We talk all the time. But you know, it was funny, outside of Halima's presentation, which was all about sort of the Iran war and oil price dynamics, you know, I was listening to a bunch of energy companies talking about how they're helping power data centers. So I guess my point, you know, going back to Paul's original question, is increasingly investors are going to be looking for how I affects, you know, kind of the end users. And we're still in the early stages of that right now.

[Host/Interviewer]

Denny. Out reaffirming folks were Laurie Kelvin, CENA RBC Capital Markets reaffirming its standard and poor 500. So I did a log regression from the Yardeni and compora low of 2022. And basically it's an exercise in extrapolation. People are just taking the trend we've been on and moving it out. I get to your 8100 near the end of the year, plus or minus, you know, a couple weeks and all that. Is it just simply an exercise in extrapolation?

[Lori Calvert]

Not, not for us. You know, we have five different models and 8150, you know it's a 12 month target but it's basically the median and average and approximation of those of the five different models. And at the low end is our GDP test which, and it's I think 77, 77, which is, you know, only looking for about a 5.7% return. Based on the idea of a 1 to 2% GDP environment. We could be in the process of moving those forecasts up. So we'll have to see how the consensus trends. But on the high end, some of our models are signaling more than 8,300, you know, two of them, our sentiment model and our valuation earnings work are right around that 8,150 mark. And again just kind of going back to the valuation and earnings data, we take the current consensus haircut it by 5%, take a P E that's based on a projection of inflation that's still running at 3%, one hike from the Fed and 10 year yields, you know, with some pressure on them as well. And you know, what we see in our modeling is that the earnings tailwinds can still offset, you know, those headwinds from the P E compression in the year ahead.

[Paul]

I know historically you've looked at Duke CFO survey. What's that telling you now?

[Lori Calvert]

It's a fun survey.

[Paul]

What the Duke CFO survey.

[Lori Calvert]

And it comes out, you know, shortly around reporting season every, every quarter. And so I, it gives a really good read that those folks do just a fantastic job of asking hot topic questions in addition to kind of the basic outlook question. And I would say the basic outlook question was the most interesting to me this time around. And what you've seen consistently in the post Covid world is there's a gap between companies optimism about their own company versus the economy. So we saw optimism on their own, companies ticked up just a little bit, optimism on the economy ticked down, but that gap remained very, very wide. And I think it speaks to the resiliency of corporate America and their faith in their ability to manage, manage through. So we expect to hear more of that in this upcoming reporting season.

[Host/Interviewer]

Not a trick question, Paul, to you as well. What is more valuable, the CFO survey or the CEO survey?

[Lori Calvert]

Well, we, we look at a number of different surveys. So we look at the business Roundtable as well. Conference board has a good one. I mean you Know, maybe I'm just a data nerd. Right. So I'm partial to the people who are crunching all the numbers and deep in the. But the CFO one sort of speaks to me a little bit more.

[Paul]

Those are the ones allocating the capital, and they decide, you know, what gets funded and what in when things.

[Host/Interviewer]

When you get into trouble, all of a sudden, that's where the phone calls come into.

[Paul]

Yep.

[Lori Calvert]

Right.

[Paul]

Outside of what's screening well for you guys, whether it's an industry or a factor, what are you guys looking at?

[Lori Calvert]

So, you know, I think the financial sector still looks interesting, and this has come up a bit in conversations recently, you know, so valuations still look very reasonable. They're moving up a little bit in absolute terms, but still look cheap in relative terms. Earnings revisions have been good. If you look at, you know, one of the ways the sector trades, it tends to do very well when consumer sentiment on the Michigan survey is rebounding. And we have seen, you know, across the consumer surveys, you know, I know the headlines are always, you know, negative and how low they are, but if you kind of zoom out, it looks to me like those indices are trying to stabilize. So we've been increasingly talking to clients about if we have sort of seen the lows on consumer confidence or sentiment and get a turnaround, this looks like a sector that should benefit from that. It's also, you know, one of the more reasonably valued areas of the rotation trade.

[Host/Interviewer]

Laurie, thank you so much. Larry Covid, thank you for coming in on a Monday. Really, really appreciate you here, and a rainy one at that.

[Paul]

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