Takeaway #1: What investors wanted to talk about on our trip to London and Switzerland last week.
Some of the topics they were most interested in discussing were AI, earnings, and sector views. There was, overall, more interest in positioning than broader market direction.
Midterms came up in several meetings as well, with curiosity about our thoughts on whether additional stimulus ahead of the event was likely (we said it was unlikely), and interest and surprise when we noted that betting markets have been starting to turn more optimistic about the possibility of a Republican sweep.
The health of the US Consumer and our thoughts on Small Caps were other recurring questions. Iran came up less than we expected, where we sensed wariness as opposed to panic. Fed discussion was light, and there wasn’t a lot of focus on the inflation prints, but we also proactively walked investors through the potential impact of higher inflation and interest rate assumptions on our S&P 500 outlook via assumptions in our valuation/EPS model, which we discussed in our most recent target price update.
The conversations we had on AI, earnings, and sectors were subsets of a bigger discussion. Most investors we met with were very much on board with the idea that Tech broadly and AI specifically were extremely bright spots in the earnings backdrop. Our charts on Tech, Energy, and Materials boosting consensus EPS growth forecasts for 2026 and AI names showing expanding EPS growth leadership in 2026 vs. Mag 7 and SPX broadly were well received.
“Most investors we met with were very much on board with the idea that Tech broadly and AI specifically were extremely bright spots in the earnings backdrop.”
-Lori Calvasina, Head of US Equity Strategy, RBC Capital Markets
Despite this, and some noting that they’d had plenty of exposure to this trade and were performing well, there was a clear interest in exploring what other areas might offer better opportunities going forward. There seemed to be agreement with our view that alternatives are tough to identify.
On Commodities: There was more interest in talking about Energy than I’ve seen in a long time in Europe. We pointed out that valuations still looked slightly attractive in the S&P 500 sector.
On Financials: While we wouldn’t say everyone was bullish, there was clear interest in discussing this sector, and our chart showing how Capital Markets valuations got extremely high last year but have come down was well received.
And Consumer Staples came up in defensive discussions. Investors shared our frustration with Healthcare where we’ve seen weaker EPS revisions and flows, and we noted Utilities might get caught up in affordability concerns around the midterms. One idea that came up in conversation that seemed to really resonate was that of Staples’ problems being well known and that it was already cheap, unlike Consumer Discretionary where problems are known but the sector looks pricey, or Industrials where companies have been emphasizing the ability to manage through and the sector looks expensive.
