We’re biased in favor of growth and U.S. equities continuing to lead, says RBC’s Lori Calvasina

Summary

Lori Calvasina, RBC's head of U.S. equity strategy, explains why she is biased in favor of U.S. growth equities leading again after the momentum unwind reset big-cap growth valuations. She maintains a year-end S&P 500 target of 8050, citing fine valuations, subdued sentiment and strong earnings. She warns that while equities can handle up to four rate hikes, more aggressive tightening would hurt returns.

• U.S. growth trade expected to resume leadership as earnings return to focus
• Momentum unwind washed out overvaluation in big-cap growth, improving the setup
• RBC model projects S&P 500 at 8050 with conservative rate and inflation assumptions
• Valuations are fine, sentiment subdued, and earnings remain on track
• Historically, up to four Fed hikes deliver solid equity returns; more than four cause sharp declines
• Be selective amid potential macro flare-ups around interest rates and the Fed