RBC策略师：标普目标8150，盈利强劲但利率通胀构成逆风

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And as always, on the Bloomberg Terminal and the Bloomberg Business App. We begin this hour with stocks holding close to all-time highs, looking to build on three straight weeks of gains. Lori Calvacina of RBC maintaining her rolling S&P target of 8150, writing, "We continue to think of our forecast as higher but not heroic and reflective of the idea that stocks can move higher, though the path is unlikely to be linear."

Lori joins us now for more. Lori, good morning. Good to see you.

Good morning. That's quite limited upside on the S&P compared to where we are right now. What gives?

Well, so look, we update the target once a month and we last did this at the end of July. So, we've obviously had a big move this month. And so, we would tell you to go back and look at the end of July when we froze the models. It was actually about an 11.4% return over the next 12 months, which is basically in line with trend. And I would say as we go through the five models, our cross asset model has been very constructive.

You know, looking for plus 8,300. Um, when we look at the AII sentiment model, that's also been arguing for like a 10% plus gain. Our GDP model is interesting because back at the beginning of the year, consensus was looking for like 1 to 2% GDP early next year. Um, and now what we're seeing in those 2027 forecasts is numbers a bit above 2%. Our economists have also moved to slightly above 2% and that's all cons also consistent with a 10% plus gain.

But we have cautioned people that those upgrades to GDP forecast came as the war was turning more optimistic in terms of outcome and that you know could potentially be at risk of maybe settling back down into a slightly lower range if we had significant war setbacks. So it's something we've got to watch but we're not seeing any change in the data yet.

And Marine no doubt we'll turn to the war in just a moment. Let's just build on the outlook here and where sentiment is at the moment. Yours is a 12-month roll in target. Let's just stick to the year-end stuff from the other strategists. At the moment, the average is about 78.50 on the S&P 500. That doesn't scream exuberance on the strategy side of things right now. Like look through the numbers on the earnings side. 20% earnings growth expected.

Yeah, we get something closer to 30. That's a major earnings boom and yet still quite a limited outlook on Wall Street. What explains that?

So what we've seen in our modeling is that there's a sliding scale between the pressure on the PE and the strength in the earnings. And so we've actually got, you know, we're modeling to the middle of next year. We've actually gone in ahead and haircut consensus EPS growth by 10%. And then we and you've got very very bullish numbers, but we've said fine, you know, if you're worried, let's just take some off the top, kind of consistent with what we normally see.

Um, and but what we're really seeing is that if you look at kind of an elevated inflation rate, if you bake that in, if you bake in a couple of hikes, if you bake in 10ear yields of say 4.75, you get some decent PE contraction which can borrow against, you know, or kind of offset some of that earning strength. And that's really, you know, I would say what investors are struggling with. The macro crowd, you know, is really in a tizzy over the interest rate environment, right?

Less so this week than they were a week or two ago, but still feeling pretty unsettled. Bottomup equity people are like, "Yeah, we're watching that. It's like number five on the list of things we're worried about because the earnings are so great. But the reality is you have very complex crossurrens, strong earnings tailwinds, but you've also got these headwinds on the interest rate and inflation side.

You mentioned one of those complexities being the war. Today is technically supposed to be the 60-day mark memorandum of understanding. To Jonathan's point, there's been very little understanding. Are clients still asking about this?

So, it comes up less to be honest than you would think. And I do think there's been some desensitization, but I also think, you know, I joked once many years ago that macro people, we can worry about whatever big pictures we want, but the bottomup equity people don't pay attention unless their companies are talking about it. And so when we go and look at what companies are saying on earnings calls, you know, I I think I went on a rant about this like a couple of weeks ago, but like the first half of reporting season, the companies just were not talking about the war either.

And I said, look, you know, you've got and we put this in our weekly. I don't know if anybody paid attention, but we said, you know, we need guidance from corporate America on how things are going with hedges, how things are going with inventories because last reporting season they all said they had at least a couple quarters, you know, to kind of work through. And we said, well, you know, and they also were saying, by the way, they thought the war would go, you know, through the summer or 2Q.

And we said, well, 2Q, you know, has passed. Summer is here. Where are we now? I would say the commentary that we've started to see come out the last couple weeks is more and kind of looks, you know, at the idea that maybe some of those inventories or hedges are working off, but others are still in place. So, you know, it it feels like we've got less wiggle room, but we've still got some.

So, this week we'll hear from Home Depot, we'll hear from Target, we'll hear from Walmart as well. You'll hear from those names across Tuesday, Wednesday, and Thursday. Retail sales was really, really soft. How do you expect these companies to guide around the consumer into year end? So look, I think the commentary we've been continuing to hear is value seeking behavior. You know, sort of the pressures from the low end creeping up to the middle end.

Um, you know, I think largely what we've seen so far from companies has been consistent with this narrative that we've gotten, you know, kind of over the last few quarters, but there were some cracks, right? And if I look at the travel companies, um, I've been reading those on the team. We split everything up and, you know, what we've seen is maybe some inconsistent discussions in terms of how resilient that consumer is.

So that was one crack we started to notice and then we had a big restaurant a couple weeks ago say they had actually seen some slowing. So you know we're going to have to see what we get but I would say that the kind of theme of resiliency I think that's going to be a hard one to break even as companies are acknowledging you know maybe some cracks.

Do you think we could continue on two slightly different tracks where we've got this massive corporate earnings boom on one track and then this moderating economic macro backdrop on another.

If you look back to 2015 2016 right we had the industrial energy recession and the consumer was very strong. Um, so you kind of had two tracks and I would say we're seeing more and more of that over the past, you know, kind of decade or two where things are not necessarily a, you know, sink sink sinking up across the board. 2022 and 2023, 2022, we had a tech earnings recession. You know, we had weakness in the rest of the market the following year.

So the idea that things can get on different paths um, isn't that actually unusual for the last decade?

A few weeks ago, people were once again talking abou