Welcome to RBC’s Markets in Motion podcast, recorded January 27th, 2025. I’m Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets. Please listen to the end of this podcast for important disclaimers. The big things you need to know: First, 4Q24 earnings season looks solid on the stats so far. Second, bulls bounced back in the weekly AAII survey last week, as US equity flows stabilized.
If you’d like to hear more, here’s another 5 minutes. Let’s get right to it.
- So far, within the S&P 500, 82% are beating consensus forecasts on EPS and 63% are beating consensus on sales. These stats are even better for the R2000.
- Stocks are also behaving logically, with earnings beats outperforming in terms of immediate price action post results while misses are lagging.
- We’ve seen some modest downward revisions pressure on bottom-up S&P 500 consensus EPS forecasts, which are now tracking around $273 for 2025. There’s nothing alarming about the pace of the downward revisions, which still looks mild relative to history for the S&P 500. The stronger US dollar seems likely to keep this pressure on for a while longer.
- Our team continued to read through S&P 500 earnings call transcripts last week, looking for insight into the macro backdrop. The takeaways we discussed last week remain intact, and to be honest we didn’t learn all that much in the way of new information last week.
- General outlook discussions continued to emphasize uncertainty amid optimism, with some companies highlighting steady end markets and others highlighting mixed end markets.
- Descriptions of the US consumer ranged from strong to variable with low-end weakness and value consciousness highlighted.
- The labor market was generally viewed as strong, with some companies noting their own headcount had been stable while others highlighted some purposeful contraction in their own workforces. Views on labor supply were mixed.
- Domestic policy discussions expanded on reasons for optimism (regulation, M&A, tax, improved business confidence) and uncertainty (tariffs, immigration). Tariff discussions tended to emphasize a wait-and-see approach and learnings from the past.
- AI discussion was more prevalent, with companies emphasizing that datacenters and generative AI were still early days and positive impacts from this theme on current demand.
- FX commentary was also more prevalent, with pressures from a stronger USD highlighted.
- Several noted strength in Asia/China generally, but several also called out continued weakness in the Chinese consumer.
Wrapping up with Takeaway #2: What jumps out on vibes and flows.
- Net bulls bounced back on the weekly AAII survey last week, to 14% on the unadjusted weekly data point, taking the four-week average back up to -0.7%. The recent dip in the US equity market saw the S&P 500 fall to 4.3%, below its December-2024 high, just shy of the 5% level that we consider to be a true pullback in the index. For the moment, the bulls appear to be back in charge, taking their cues, in part, from the belief that tariff talk from the new administration is more bark than bite.
- We continue to keep a close eye on the University of Michigan consumer sentiment survey, which came out on Friday, capping off a light week for economic data in the US. There have been some interesting divergences in trend under the surface in recent months, with improvement in men, lower income, and lower education cohorts, and deterioration for women, higher income, and higher education cohorts. The disappointment seen in the headline data last week was noteworthy to us, not only because it was unanticipated by market participants, but because we saw the improvement that had been underway for men …
- …and the lower education cohort reverse course, lending support to the idea that the deterioration in consumer sentiment had some breadth.
- And finally, the biggest thing that jumped out in our funds flow work this week was the emergence of some modest improvement in flows for US equity funds (growth and value, small and large)…
- …developed market momentum funds flows…
- and flows to a variety of developed market non-defensive sector funds categories, particularly Financials and Industrials – trends that provide some tailwinds to both the old and new leadership within the US equity market.
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.