RBC's Calvasina Sees Nervousness, But 'No Panic' in Stocks

Summary

Lori Calvasina of RBC Capital Markets discusses the firm's sentiment model, which projects a 10.8% gain for the S&P 500 over the next 12 months, while acknowledging expected 5-10% drawdowns. She describes a 'Four Tiers of Fear' framework to help investors contextualize market declines and avoid overreacting, noting that institutional investors show nervousness but no panic, and retail investor optimism remains elevated. The conversation also covers the evolution of retail participation, comparisons to the Korean market, and historical drawdown lessons from the GFC and Covid era.

• RBC sentiment model forecasts 10.8% S&P 500 gain in 12 months.
• Base case includes 5-10% drawdowns, not linear gains.
• Drawdown severity tiers: 5-10% normal, 15-20% growth scare, 25-33% recession.
• Institutions show nervousness but no panic; retail optimism near all-time high.
• Retail ownership at 20-year high, changing dip-buying dynamics.
• Speaker sees more guardrails in US than Korea's leveraged retail market.
• Historical drawdowns: Covid was recession-like, 2022 felt like recession due to inflation.