The great recalibration offers a roadmap to the future | Transcript

Joe Coletti

Welcome back to Strategic Alternatives, the RBC Capital Markets podcast. I'm your host for this episode, Joe Coletti. Today, I'm excited to be joined by Nik Modi, our Global Co-Head of Consumer Research, and Robert Kwan, Head of Global Power, Utilities and Infrastructure Research, here at RBC Capital Markets. Nik and Robert, welcome and thank you both for being here.

Nik Modi

Thanks for having us.

Robert Kwan

Great to be here.

Joe Coletti

So today we're going to explore the disruptive forces reshaping industries, economies and societies, drawing on insights from our recently updated RBC flagship report, RBC Imagine: The Great Recalibration. This conversation takes a cross sector view of structural shifts underway, and challenges clients to think beyond the near term, to imagine how different futures could take shape and how to position themselves for success.

Joe Coletti

Let's start with the big picture. Nik, maybe we'll start with you. What's the lens of RBC Imagine, and why is this kind of forward-looking framework so important for clients right now.

Nik Modi

Yeah, thanks, Joe. So look, most organizations are very silo based. Our investing clients are organized by sector. We on the sell side are as well. Our corporate clients are siloed by either geography or product category. Imagine is really meant to provide a lateral perspective, to put everyone on the same page, regardless of geography, product category, or function. And this is becoming increasingly important in a world where convergence across sectors is happening at a very rapid pace. Think about how the pharma industry impacted the packaged goods space via GLP-1s, or how AI had direct implications on the utility industry. Some of the reasons that we started this initiative back in 2018 originally was built off the observation that company boards and managements were spending so much of their time putting out fires and addressing the here and now that very little work was being done to think about what's coming around the corner. So we're hoping to fill that deficiency with this product.

Joe Coletti

Robert, anything you want to add to that?

Robert Kwan

Yeah, thanks, Joe. I see the RBC Imagine framework as supporting thought around a range of potential future outcomes to find opportunities and, importantly, mitigate risk. I think RBC Imagine is a powerful tool when pairing the potential longer term outcomes stemming from the five themes outlined in the report, with a shorter-term investment thesis. Let me give you a case in point for infrastructure. Crisis Capitalism starts with the premise that instability becomes the norm, with Shifting Superpowers focused on capitalizing on energy self-sufficiency and energy exports. Managing supply chain risk and having buffers as insurance are going to be key going forward. In the last year or two, we've seen onshoring near shoring and China plus-one supply chain strategies, which may not be optimal from a pure cost perspective, but are about managing risk. We think strategies like this, that mitigate risk against various types of events will increasingly become the norm.

Joe Coletti

The latest RBC Imagine flagship report identifies the five themes that you say operate a systems level forces reshaping the landscape across sectors. Those five themes are: Stratified Society, which focuses on the transformative technologies and how they will redraw class lines; Synthetic Everything, and how substitutes will infiltrate every aspect of our lives; Rise of the 8th Continent, how digital platforms are repositioning the global order; Shifting Superpowers, the economic and geopolitical norms, and how they're rebalancing; and Crisis Capitalism, how resilience has emerged as a defining principle. Robert, maybe you can take this one first, what are the major forces that you're tracking, and how should companies really be thinking about them now?

Robert Kwan

I'm thinking about all of them as there are important takeaways from each of the five Imagine themes. As it relates to power, utilities and infrastructure and energy more broadly, it's hard for me not to gravitate to Crisis Capitalism and Shifting Superpowers, given the war in Iran and what it's done to energy supply, and as many of us have seen, energy prices. However, I think about Stratified Society and what we believe the focus by governments and regulators on affordability, and especially what that means for regulated utilities. I think about the Rise of the 8th Continent and the way these large tech platforms are changing the electricity landscape. And then the fifth theme is Synthetic Everything, and think about the opportunities related to potential advancements in clean energy technology. From synthetic components.

Joe Coletti

Nik, what about you?

Nik Modi

When I think about it from, you know, more of a consumer lens, right? I think about Stratified Society and the whole notion of this K-shaped economy, you know, it is not cyclical, it is structural. The bifurcation between high income and low income will probably widen even further as we go forward, mainly because of AI, right? If you have ubiquitous access to AI, you're just going to be faster, smarter, and if you don't, you're going to be left behind. And I think that divide is going to continue. Robert kind of touched on what was going on in the Middle East, the shifting power dynamic based on the Strait of Hormuz, right? I mean, you know, this is going to happen all over the world, especially as geopolitical tensions rise. And then we think about Crisis Capitalism, right? Obviously, big implications for my space in the Consumer sector. These stocks have gone to very low relative valuations relative to history, mainly because they're not situated for a world where these recurring events are happening over and over again, and that's causing issues with consistency and earnings delivery. As a result, their valuations have truncated.

Joe Coletti

Now, Nik, many of these themes cut across sectors, but they ultimately converge at the consumer level. Can you give us a few examples around how consumer experiences are changing and some of the forces you think are driving those shifts.

Nik Modi

Yeah, it's really interesting. So, you know, we talk about Shifting Superpowers, and we primarily focus on geopolitical dynamics, right? Like what's going on at the at the country level, but if you actually think about it from a consumer behavioral standpoint, you know, Asian influence is having a big, dramatic impact on what we are doing in the U.S. from a consumption standpoint, right? So I find it fascinating, think about KPop Demon Hunters and how popular it is on Netflix and K-Pop in general. Korean beauty is growing triple digits in the U.S. right now. We're seeing a whole host of Asian flavors and ingredients, permeating mass consumerism, right? Think about matcha lattes as an example, or kombucha, or turmeric. These are ingredients that have been used in Asia for, you know, thousands of years. Another thing, and we touched on it earlier, you know, the Rise of the 8th Continent, this whole notion that, you know, these platforms, social media platforms, are countries in themselves, and how digital conversation is really influencing what we're doing in the physical world, right? I mean, I see so many instances across my coverage where if a trend takes up on TikTok or Instagram, it's driving physical case volume, higher than, I think, what people were anticipating on a quarterly basis.

Joe Coletti

We're seeing parallel shifts in retail and commerce. How are companies rethinking their business models? And where are you seeing the biggest points of convergence across industries?

Nik Modi

From my vantage point, the biggest intersection is Health, Consumerism and Tech. A few years from now, most of us will have wearables that will tell us exactly what is happening in our bodies in real time, and that's really going to govern our decisions. So historically, if we were leaning on a marketing campaign to influence us to buy something, now we're going to have data to make our own choices. So, the axes of influence are shifting dramatically. They're going from out of the home into the home, and that's going to have some real big implications.

Joe Coletti

So what do these shifts mean when you think about, sort of the production and supply chains, and what's going to happen to them as a result of these technological shifts and a lot of this convergence that you're talking about?

Nik Modi

There's a lot of different facets to this, Joe. I mean, one is personalization at scale, right? The ability to actually have an AI avatar literally speak to you individually as a consumer based on your needs and wants. Right? Number one. Intelligent assortment. Maybe in the future, retailers can have customized assortment based on their box, based on who is shopping in their store, that would help reduce out-of-stocks, help increase velocity and relevance for the local market. AI speeding up innovation, right? PNG has talked about the fact that they invented a new molecule for their beauty business in six months, whereas normally would have taken six to nine years, right? And then we talk about synthetic ingredients and how that could really change the game in terms of how supply chains operate.

Joe Coletti

When you think about the sort of real estate aspect of this and how it is evolving, as sort of consumer technology and service models start to start to converge, what are you seeing?

Nik Modi

As this next generation of consumers age, they're not trying to manage their decline. They're trying to optimize their lives, right? So, you're going to see entire communities, you know, these advanced, silver communities, as we call them, pop up and emerge that are going to have so many services, maybe longevity-as-a-service will be integrated into these communities. Right? Then I think about retail and the fact that, obviously digital commerce is becoming more and more popular. So what does that mean for the retailer? Well, that means a retailer still has an opportunity to engage consumers with experiences. If they really bring experience into the store, I think it could create incredible traffic, because people are going to want to get out and about and start engaging, right, not just sit behind their computers or their phones and ordering their products. So, there's a lot of shifting that's going to happen, and technology is going to be a big driver of that.

Joe Coletti

And all of this becomes even more complex, I think, when you layer in supply constraints, as it relates to Power and Infrastructure, which is what I want to kind of turn to you, Robert. How is the collision between technology growth and some of the energy constraints reshaping both planning investment in the space?

Robert Kwan

Yeah. Look, I think it's become abundantly clear that speed to market is a driving factor behind many data center developments. And we're seeing action on power supply today that seems very focused on prioritizing speed to market versus cost or even efficiency. So, this notion creates simplicity as data center developers bring their own behind-the-meter power solutions, while buying time for grid owners to manage supply, just given all of the layers of regulatory and permitting that's involved there. That being said, there are many data center developments that are looking for grid connections, and we've seen data center projects in geographies that have the available utility capacity, while other jurisdictions have struggled with how to manage the grid and or protect rate payers.

Joe Coletti

So it's abundantly clear, as with many decisions, infrastructure decisions are increasingly geopolitical, or geopolitically influenced. Countries were already rethinking some of this. We have the Iran conflict that's going on that will likely lead to them rethinking it even more. But they're rethinking security, supply chains, even sovereignty in some cases. How are trade routes and sort of cross-border investment patterns? How are they starting to change?

Robert Kwan

For energy, we're at a really pivotal time now. The war in Iran has the potential to radically change the approach to supply chains, and we think that North America is very well positioned to supply more energy to countries that historically relied on the Middle East. The real key is whether North America, and especially Canada, can respond to the challenge in an expedited manner, or at least one that can give buyers of energy visibility that the required infrastructure will get built. If not, the opportunity could just be lost, and those countries may have to look elsewhere for their energy. One last aspect that I wonder is whether the RBC Imagine theme of Crisis Capitalism will result in companies and countries requiring greater inventory and over-contracting to ensure a secure supply of energy. For example, will it be good enough to just replenish strategic petroleum reserves to pre-Iran-war levels? Or will SPR targets be at materially higher levels?

Joe Coletti

You touched on Canada. But I'd love for you to add, if there's anything else you want to cite in terms of what it might mean for especially a resource-rich democracy like Canada.

Robert Kwan

Yeah, Canada has some of the largest and most economic energy resources in the world, and it gives us an ability to be a reliable supplier of energy in a volatile world. There is this huge opportunity for the country to embark on a strategy to become a global energy superpower by tapping into our vast resources of conventional energy and exporting it to countries around the world, while also investing in our vast zero-carbon energy resources. Just think about hydro and wind, and then capitalizing on the existing nuclear footprint in Ontario. There's large uranium resources in another province, Saskatchewan, so really, the whole country has an opportunity here. The opportunity for Canada extends well beyond energy, as a Western democracy, high standard of living and a multicultural society. You know, Canada has this opportunity to attract the world's best and brightest minds, which has implications for sectors including technology, healthcare, education and business services.

Joe Coletti

Where are you seeing the most actionable cross-sector plays, particularly for companies right now, both to build resilience and to stay aligned with how consumers continue to change?

Nik Modi

Yeah, look, I think, number one, the need for redundancy in the supply chain. Just-in-Time, I don't think, is the right model in this world where disruption is more normal than not. And then I think about partnerships and leveraging AI to have a more integrated and coordinated supply chain, even for non competitive companies that might have similar types of production processes. You know, leveraging each other's capacity during downtime. Then I think about rethinking employee training and core competencies, right? I mean, think about a world where AI is being integrated into every aspect of business, and what that could potentially do in terms of cyber threats, right? So should all employees understand or have a basic knowledge of Python or, you know, cyber security so you know, as they're doing their normal workflow, it doesn't create risk for the overall organization.

Robert Kwan

And energy is truly a cross-sector topic as well. We can talk about conventional energy, which is in focus, given so much hydrocarbon production comes from the Middle East. But renewable power capacity continues to grow, and nuclear is having a really big resurgence. On top of the energy producers, the growth in all forms of energy creates opportunities for Power, Utility and Infrastructure companies, but also engineering and construction firms, construction equipment and complementary equipment manufacturers such as transformers. Further, we've also seen the rise in demand for battery storage place rare earth minerals in the spotlight and opportunities for a variety of mining companies. So I've highlighted a number of sectors that are impacted by energy development, but in reality, there are very few sectors that are not impacted by energy in some way, shape or form.

Joe Coletti

So we've really only scratched the surface on, not only the themes and how they're impacting sectors, but a little bit in the Consumer space and the Power and Infrastructure space. And we will have future episodes where we dive deeper into sectors, into particular themes. So I encourage our listeners to stay tuned and watch out for our new RBC Imagine-themed episodes that'll be coming up over the next couple months. And Nik and Robert, really appreciate your insight. Really appreciate your time, and we can't wait to have you back to dive deeper.

Nik Modi

Looking forward to it.

Robert Kwan

Thanks for having us.

Joe Coletti

Thanks for listening to Strategic Alternatives, the RBC Capital Markets podcast. This episode was recorded on April 15, 2026. Listen and subscribe to Strategic Alternatives on Apple, Spotify, or wherever you get your podcasts. If you'd like to learn more about RBC Imagine or get a copy of our flagship report, please contact your RBC representative or visit rbccm.com/imagine. See you all next time.