Despite optimism over a Federal Reserve policy pivot and better-than-expected corporate earnings reports, RBC Capital Markets’ Lori Calvasina is sticking with her 4,100 year-end target for the S&P 500 index.
(Bloomberg) — Despite optimism over a Federal Reserve policy pivot and better-than-expected corporate earnings reports, RBC Capital Markets’ Lori Calvasina is sticking with her 4,100 year-end target for the S&P 500 index.
“In general, multiples are about where they deserve to be,” RBC’s head of US equity strategy said Thursday on Bloomberg Television. “I think there’s still some uncertainty in the earnings outlook. We’ve had a very, very good reporting season, but there is still a lot of questions that investors have about the outlook — for financials earnings in particular.”
Such a prediction implies that the benchmark index will end 2023 a bit lower than where it’s sitting currently. Though she acknowledges the potential of an upside breakout, Calvasina notes that much of the big tech advance that powered the equity gauge this year was driven by expectations that the Federal Reserve would start cutting interest rates as soon as July.
“A broadening out of the market — yes it’s healthy, I think a lot of people would like to see it. But it is that concentration in these big growth areas that has buoyed the market so far,” Calvasina said. “So if you start to see some people pull money out of that and put it in the more cyclical areas, it’s more of a short-lived rally.”
But while some traders await a rate cut, others are betting that the Fed stays aggressive. Traders increased wagers on a June rate hike to about 40% after Federal Reserve Bank of Dallas President Lorie Logan dismissed calls for a pause.
“If you talk to my rate strategy colleagues, they will tell you that their base case is for a pause,” Calvasina said. “They think we’ll start to see some adjustment cuts toward the end of the year, but they also think the narrative has been pretty messy and maybe people have been a little too quick to price out the terminal discussion.”
–With assistance from Guy Johnson.
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