Market Vibe Check with Lori Calvasina
48:33 Share

On the Tape.

iConnections is the world's largest capital introduction platform in the alternative investment industry. They bring the asset management community together through a membership platform that lets allocators and managers meet and connect both physically and virtually. Over 3,000 allocators and 600 managers are part of the iConnections community, overseeing nearly $48 trillion and $16 trillion in assets, respectively.

They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io.

Welcome to the Risk Reversal Podcast. I'm Guy Adami, always joined by Dan Nathan. Dan, how are you? I'm doing great, Guy. You know, I watch different networks from time to time. What, like the Fox Business? No, I don't really watch it that often. But I watch the Bloomberg at night every once in a while because I want to see where the futures are. Yeah. Follow me? Yeah, I do. And they do an excellent job. Yeah. And recently I'm watching, and then they call that thing on the side the crawl. Yeah.

And on the crawl, it said 6.30 a.m. tomorrow, Lori Calvisina will be joining us. That's RBC Capital's head of U.S. equity strategy? Correct. You know who's joining us right now? Lori Calvisina. The aforementioned Lori Calvisina. Welcome back to the pod. Thanks for having me. She has reached, by the way...

She sort of transcended all this media stuff. Like she's her own brand now. By the way, she comes on the Fast Money. You also sit sometimes for the whole hour. Do you enjoy that? I do. I mean, I'm still astounded. They keep asking me back, but I do love it. They've been asking Guy back for 18 years. So you're fine. Hey, by the way.

You like the new name of the podcast? Risk Reversal Podcast. Just say yes, Lori, please. I love it. I love it. A plus. Yeah. You were here, by the way, July 12th was the last time, which was last summer. Truth or Consequences is what we named it with Lori Kalvasina. You probably named it that. And once again, it shouldn't be a surprise, but a lot of the things that you talked about that I probably disagreed with.

have come to fruition. Respectfully disagree. No, it's always respectful. Okay, I just want to make it clear. When am I not respectful? I just want to make it clear for the audience. Lori, I'll ask you, am I disrespectful ever? Never, never. I didn't feel... She's just actually telling us what we want to hear so far in the first... Anyway, listen, but you were... Again, a lot of the things that you talked about have come to fruition. So we're sitting here on a February...

ahead of the jobs report on Friday, I want to be clear. Interest rates in the 10-year have gone from 4.8 almost down to 4.4 or so. S&P 500 is within 50 handles-ish of an all-time high. And this is in the midst of or in the wake of a lot of geopolitical stuff, tariff headwinds, all these different things, yet here we are. So from that vantage point, let's start there. Thoughts on where we are today?

So, look, I think we've been on a good path. I think we came into the year on a good path, but I think it's a rocky path. Right. So we've got 6600 as our year end target. And we were very clear with people in the year ahead outlook. And when we came in that we expected to see a 5 to 10 percent drawdown at some point early this year. And we've had a couple head fakes where we thought it was starting and it stopped at our worst point. We got down 4.3 percent from the December high.

You know, the fact that we're dancing around these all-time highs right now, I think we're where we deserve to be. But at the same time, what we learned from this tariff episode this week is that we do not have the capacity to absorb bad news. None of us have the ability to predict the news flow. And that is a very humbling thought.

for forecasters and not one that a lot of people want to fess up to, to be honest. But I'm very humble about that. We're going to take it as it comes. We're watching things like the vibes, GDP forecasts, 10-year yields. Things are still in a good place, but I do think we have to monitor the vibes pretty closely.

But, you know, so we're still on that rocky path. So next to tariffs, Lori, what are some of the other policies that make it hard for you to forecast, as you just mentioned? Because it seems like over the last kind of two months, prior to the inauguration, there was a lot of stuff thrown out, right? And I think that this administration or the folks in and around the president, they like to say, what do they call it? Flood the zone. Flood the zone. A little bit. So sometimes you have to separate forest for the trees a little bit. So

Other than tariffs, trade war, what are some of the other policies that make you nervous? So I would say this doesn't necessarily make me nervous because I am on the sort of optimistic side of this. But if we look at things like regulation, we've heard a lot about that since November. That feels like it's in the price at this point. So what exactly are we going to get from that that we haven't already?

You know, and I think there's also optimism. I would sort of put M&A around this as well. I am a little nervous that everyone's going around saying M&A is coming back. When are we actually going to see the activity? I think you have until 2Q. And number three, I think, is taxes. And this one does make me a little bit more nervous because I heard a number of analysts going around after the election saying, hey, my industry may get a tax cut.

And, you know, what I heard on the campaign trail was that this was, you know, if there were going to be any new corporate tax cuts, it would be for domestic production. That doesn't benefit restaurants or banks. You know, so I think there may be too much optimism on tax. And I've been joking this week.

I really want to see the tax bill. I despise tax policy as an analyst. I don't like working on it, but I really need to see what's in that tax bill. Can you explain something to me? Why is the idea of deregulation, which would cause a wave of M&A, so bullish, in my opinion? Because if I go back in the history of my career, some of the biggest M&A has literally led to tops of the market, tops of sector performance, that sort of thing. And most

of major M&A has not been good, at least in technology. Look, I think on the M&A side, and I would maybe separate it a little bit from regulation, but I think on the M&A side, and I've been trying to look for any sort of crumb of information I can find in company earnings calls, whether it's from the financials or other industries.

And it seems like the financials are all pointing to this idea that there's a big, robust pipeline and there's all this stuff that companies want to get done and private equity wants to get done. And they just haven't been able to do it for one reason or another. And a lot of that has to do with what was being done out of Washington. So I think the idea that these pipelines are just sort of bursting at the seam and there's some runway, right? They would probably argue to you, Dan, that we're not close to the top, that there's going to be some distance to go before you can get there.

there. I think on the regulation side, I think it's more about just the cost of doing business and the ease of doing business and kind of taking away some of those frustrations. Let's talk about volatility because although we're not necessarily seeing it in the VIX, although there have been episodes and episodes that last a day or two, we are seeing it in individual stocks in a meaningful way, both to the upside and the downside. For me, Lori, that means it

It's just a matter of time before the broader market catches up because we've seen 20% to 25% moves in big names higher and lower. So I think a higher VIX sort of dovetails nicely with what you think could be a rocky first half of this year. Yeah, and look, I want to agree with you on that. I will say –

However, I agree with you in spirit. Right. Like that when things are sort of acting up underneath the surface, it feels like that should that should spread. That being said, I'm an old small cap strategist. And so when I look at some of the reactions, you know, some of these news items, some of the earnings that disappoint. We've had a couple of whammies this week.

I kind of like laugh in my head a little bit. And I'm like, oh, the large cap people are just getting used to what the small cap people have had to endure for a long time. And it tends to reflect some liquidity in the market. It tends to sort of reflect some nervousness. So I'll grant you all those things. But I have been noticing this trend for a while. So

So that aspect of it, I probably don't get quite as worked up about. But I do feel, you know, kind of to go back to this tariff thing on Monday, I was talking to some of my analysts and, you know, listening to a number of them saying, look, you know, coming into the weekend, you know, whether it was the auto stocks or

You know our Canadian energy analyst right a number of people were like look, you know These stocks valuations were already reflecting some pretty onerous outcomes from the tariffs and I said well, you know at the broader market level We didn't see that right. We didn't see that in the S&P. It still felt like the optimistic Outcome was being baked in and I do think the market maybe the last like four or five years has just gotten better at compartmentalizing

All right, so on that single stock volatility that you mentioned, you're saying that large cap people were just getting used to it, except for the fact that these companies and the market caps are so large, right? So Google is down 8%. This is a $2.5 trillion market cap company. That was the day after their earnings.

And here we are two days after, and it can't really get going. We have an S&P that's up on the day. We have a NASDAQ that's up on the day. And Google is unchanged. We saw the same thing out of Microsoft the week before. And so that's obviously north of a $3 trillion market cap company. Guy and I would throw it out there and say, that's not healthy. When you see the volatility bands being widened for some of the biggest

companies in the entire stock market, some of the ones that have actually encapsulated some of the most enthusiasm. They've been driving the performance of the S&P for the last two years, which are up 25% year over year, two years in a row. And then you think about this fact, and we haven't had the opportunity to talk about this, is that NVIDIA's performance last year, nearly up 190%, was 25%.

of the performance of the S&P 500. So you put all that together, and listen, I'm not calling for a major pullback or whatever. I think to your point, 5%, 7% pullbacks in the midst of a bull market are pretty healthy, but that kind of should make you nervous. The concentration of just in the indices, but also the concentration of returns, the concentration of those seven or eight stocks and their expected year-over-year earnings growth, right? And then the 490 or whatever really doing a half

or a third of the sort of growth that those major names are doing. - No, look, I think that concentration is something that's made people very, very nervous. And my derivative strategist, Amy Wu Silverman and I have been like debating this very issue, right, for the past like year, year and a half.

And I think there are kind of two levels of concern. You know, one, does sort of this broader AI theme just turn out to not be true? Does it just turn out to be false? You know, number two, is it, you know, kind of the lesser degree of concern, right, is it just kind of over its skis a bit and something else is ready to take over? I think the former is the real, you know, kind of worry scenario. I think the latter maybe creates some potholes as you move to the other stuff in the market.

But I think there are degrees of concern you can have there. And one chart we have, we got a bunch of requests for this at the turn of the year. So it was like the thing that was on everybody's mind. And we basically looked at net income growth of the top 10 market cap names in the S&P and we compared it to the market cap concentration. And I may be getting these numbers a little bit off, but I think the market cap concentration was like 40%. And the net income concentration was like 35%. And they've both been, and so there's a gap, right? So people who wanna say it's

it's overdone, there's a point. But people who want to say it's deserved, they also have a point because those two lines are moving up together and the gap has been pretty stable. If I go back to the late 90s,

We saw basically the market cap concentration going up for the biggest stocks, but the earnings contribution was flatlined. So they weren't chasing one another. There wasn't an earning support. And there has been an earning support here. Now, when disappointments come in, those rumble, right? So there is some risk there. But I don't think that this is fundamentally as dangerous as what we saw back in the late 90s. So there's a better foundation for that

basically dispersion between the have and the have-nots? I think so. And we have this other chart where we compare the MAG7 specifically and their earnings growth and looking at the forward forecast and compare that to the rest of the market. And the gap between those two is shrinking. It's gone from like 40% a couple years ago. It's projected to go down into the single digits this year and next. But it's not flipping. The rest of the market's not asserting earnings leadership. And that's why we keep

you know, seeing this nervousness and people think the rotation is starting, but it's not quite flipping because the rest of the market is just, it's whiffing. It's missing its opportunity to take over. I'm going to ask you a question and I don't want you to answer this, but just bear with me. You know what did nothing for the majority of 2022, all of 2023? I'll answer the question. Financials.

You came on this show before July of last year and you started talking about the financials and how you liked them. There were not a lot of people talking about that. They took off all of 2024 and as we're sitting here today, depending on the ETF, I'll use the XLF, although it's not the best constructed ETF, Dan, at an all-time high. So you were right.

Do you still like financials here? Because they probably don't get weighed down or the headwinds of tariffs are probably not a problem for them. Thoughts on the financials in the here and now? Yeah, look, so we still like them. We're still overweight. We're watching them closely and we're being a little bit pickier is how I would put it. So if I look at, you know, we talked about M&A earlier. I'm a little concerned that the investment banking cohort, and I forget exactly what Gix calls that. I think it's like capital markets or something like that.

But that is an industry that looks expensive on both an absolute and relative PE if you look at a median and if you look at it against the broader market. If I look at banks, which is going to be more exposed to regionals, that's where you've still got some pretty reasonable valuation. So I see kind of valuation risk that's starting to emerge that we have to keep a close eye on. But I agree with you, Guy. I mean, we've told people on the politics side.

Look, you know, maybe there's some excess optimism on the idea that the banks are getting a tax cut. We'll have to see how that plays out down in Washington. But other than that, I think you've got all tailwinds for the financials, and I don't think you really have that many headwinds. Does it bother you when you talk about bank deregulation? We can go back to 2017-18 during the first Trump administration. That was kind of a priority, I assume.

a lot of the folks that thought he was going to be a very pro-business agenda. And it was. And when you think about some of the regulation that got lifted from some of the regional banks, it was you can draw a direct through line to what happened in early 23 with the regional banking crisis. So you think about something like that. You think about since then the proliferation of private credit.

Right. I saw an article in The Wall Street Journal the other day and said private credit is the new public credit. You know, you start seeing headlines like that and you start saying to yourself, wait, do we need any more deregulation on the financial services sector? Because every time we've done that over the last 30 years, we've ended up with a bit of a disaster at some point. And then the government has to bail it all out.

Look, if I go back to SVB and I sort of think about all the commentary that came out after that, I do think we saw a lot of people who kicked it into high gear and they had lived through the financial crisis, right? So I think we had some learnings from that. So I kind of go back to the idea that the banks are asking, you know, for some easing. And I think it is going to be a difficult needle to thread. But I would sort of rest my, you know, sort of rest my opinion on that. Just look at what the banks are asking for.

With your 6,600 price target, understanding some rockiness potentially.

How much does the labor market play into this? And I'm saying it on the eve of this jobs number, which probably is somewhat benign, maybe good tomorrow. I'm not trying to handicap it, but if you're paying attention, which we all try to do, I mean, there are layoffs coming around a swath of industries and the government. So I think the labor market is going to be challenged for the foreseeable future. The question is,

Will those challenges manifest their way into the market at some point? So I feel like, and it's funny, I think I was telling Dan before the show, I feel like we've talked about everything with my colleagues this week, except the jobs report tomorrow. It's just been less in focus for us than usual because of everything going on. But we are

keeping a close eye on labor as we're going through company transcripts to see what companies are saying. There's nothing that's really alarming me yet. We did notice coming into this week, kind of pre everything that happened on Monday, companies were talking about optimism, but with a lot of uncertainty. And if you rewind that to two months ago, it was all optimism, optimism, optimism. So it's been dented.

Right. And anytime corporate optimism is dented, you have to worry about that. Right. So we've got to keep a close eye on it. Our economist would tell you that one of the biggest problems we've got in the U.S. right now is a structural supply issue with labor. So I think that's something that we think is going to continue to give us a cushion. But as the vibes are challenged here, we absolutely have to watch it. And I do think there is going to be noise in the data in the short term, and we may need to look through for some of that.

When you say vibes being challenged, you mean like somewhat nervous sort of sentiment as it relates to economic growth? Yeah. Look, the companies on earnings so far – and look, we're still going through everything this week. I don't have a clear read on this week yet. But if I, again, look back through last Friday, it was not –

you know, like companies, if you go back to the fall, right, they're all saying, well, everything's frozen, everyone's waiting for the election, we're waiting for all this stuff to get unleashed. Companies are not coming out and telling you that things have gotten unleashed, all right? So it's not what they are saying, it's what they're not saying that's interesting to me. And they're also, again, going back to caution, caution, caution, uncertainty, uncertainty, uncertainty. So that's the corporate side. If you look at the consumer side,

So we watched the Michigan survey pretty closely and the conference board survey pretty closely. And, you know, things aren't terrible there, but you have had soft prints on both of those surveys for different reasons. And, you know, when you dig into the details, it does look pretty broad based. When you get by some of the policy issues,

issues right here, the lack of clarity. Let's say we have better clarity on tax, which you just mentioned, some regulation, trade, tariff, all that sort of stuff. And then you start thinking about, okay, where is the labor market? We just talked about that. It was pretty hot when we looked at the number for December. Maybe that was seasonal. Right now, we're expected to see a downshift. And again, by the time you're listening to this, you'll see this, 256,000

last month and expected 170 here. Unemployment rate expected to stay put at 4.1%. We've seen the U.S. dollar index come from 110 down to 100. We've seen crude oil go from 80 to 70. We've seen the 10-year yield go from 4.8% just a couple weeks ago down to 4.45. A lot of that stuff, if it is soft land-y-ish, I think I just made that up. Is that a thing? Soft land-y-ish.

Isn't that good for corporate earnings? Isn't that like, are we in a good spot? Are you one of these people think that, okay, maybe the Fed did nail it. Maybe we are in a soft landing. Maybe the fact that they panicked a little bit in the fall with those rate cuts or whatever, maybe they've given themselves some room to just let things breathe a little bit.

So, look, I think that the companies, you know, despite their fretting and despite, you know, sort of alluding to this uncertainty, they're still doing a really good job of managing through, right? And so we know that they've generally been able to do that the last like six, seven, eight years. So we do want to give them credit for that.

I will tell you, when we do look through some of these reports, we still see, you know, despite some of these very recent movements, consumers are still struggling with the cumulative impact of higher rates and inflation. And so, you know, and on Wall Street, we may get excited that these things have moved down a little bit. And I'm certainly excited, you know, we're not sitting at a 4.8 percent 10-year treasury yield. We go to 5 percent. That's really bad for my model. So I'm more excited at 4.4 or 4.5.

But I don't know that your sort of average person on the street feels that impact. And I still see that coming through in companies' discussions. And again, if you go back to some of these consumer sentiment surveys, the inflation expectations have, in some cases, moved up a little bit. And even if you look at the NFIB Small Business Optimism Index, that has surged in terms of optimism. The uncertainty has come down, but the uncertainty is still really, really high versus the street. Watch what I do here.

We do our show Fast Money at the NASDAQ in New York City's Times Square. Monday through Friday at 5 o'clock. We have a great crew that works with us. A fantastic crew. We do.

And somebody told me, I never hear, I'm not an expression person, but one day we were just chatting and they said, your vibe attracts your tribe. And this is one of your things is this vibe. I've heard you say it a few times, right? And I get it. Positive energy attracts positive energy. So right now people feeling really good about things. And that vibe is attracting a lot of things, not least of which money into the stock market. It's all working.

The CRB index is something that I watch. It's not the GSCI. CRB is comprised a little bit differently. Agriculture is the biggest component of it. It's trading at 14-year highs. It's trading not around the all-time high, which was in '08, but approaching that in a meaningful way. So I bring that up because the commodities that nobody talks about have been exploding to the upside.

which I think is inflationary and people are feeling it. But this administration is in the honeymoon period. So my long-winded question to you is how long before this starts to take hold and people say, you know what, it's still a problem and the consumer, which is a driving force, starts to pull back?

Well, look, I think that the sentiment surveys, and I hate to keep going back to this, right, but would tell you that maybe this honeymoon is a little bit shorter than anticipated, right? That this sort of, you know, excitement out of the gate, you know, stumbled, you know, at least very briefly. We'll have to see where it goes from here.

I keep coming back to the second quarter. I think that's really where the rubber meets the road on a lot of this stuff. And I was joking with some people at the office, like I tried to order eggs at the beginning of the week and I couldn't get them till Friday. So we're already starting to see some of this stuff impact people in their everyday lives.

I wonder if some of this kind of overreach or David Rosenberg of Rosenberg Research, friend of the pod, he had a note out earlier in the week and I just used the term overreach and maybe I used it incorrectly, but he thought it was a misstep for the Trump administration to come out so hot, threatening our two largest trading partners, which are our allies and

And really, rather than just kind of focusing on China, where I think it is a bipartisan agreement that some of the trade issues and they've been going on for decades. You know, I mean, we need to kind of sort out. And Trump has been all over that for 10 years, I think, before he was even a candidate. But then you start throwing in the threats of our other allies in Europe, you know, tariff things.

You know, if we get a bottleneck on that front, if we get into a tariff slash trade war, does that put, and this is Rosie's point, does that put some of the pro-growth agenda, some of the fiscal stuff that they want to do, some of the tax cuts, you know, that sort of thing, does it put that at risk? Because that would be, you know, something that I think the market, the stock market would have a very difficult time with.

So, look, I think with the tariffs, the most interesting thing about this to me was coming into the past weekend. I talked to so many people who said, you know, there's a 30 percent chance that this is going to happen. It's all bark. It's no bike. It's not going to really happen. And I think that's why you did see and it wasn't that bad of a reaction in markets. Frankly, I think it felt worse than it actually ended up being on paper.

But there had just been, you know, this insistence, I would say not so much on the buy side. I think the buy side was more mixed. I think Europeans and Canadian clients, I did a lot of non-US marketing in December and non-US investors were pretty worried about this. And then I got back to the States and it was more mixed, but I would say more biased to the idea that it wasn't going to happen. And if it didn't, it wouldn't be that big of a deal.

So I think it caught a lot of people in the states who are based here by surprise. And I think it caught the forecasting community by surprise. You know, what I told people was,

I wasn't baking it into my forecast either. I was more like 50-50, but I thought it was an underpriced tail risk. You know, if I could sort of borrow from my derivatives colleagues, you know, jargon. And, you know, we spent a lot of time this election, the last two elections, remember this is our third election that we had the current president running for office, was very crystal clear to me that tariffs were something he thought was an appropriate tool. And if you underestimated that, you know, frankly, I don't really...

I don't know why people wanted to underestimate that because it was clear to me that you either took it seriously or needed to make people think you were really going to do it. Financials, you mentioned. Now, one thing that I thought would fly last year, which went nowhere, was energy. You like energy this year. Now, is it energy predicated on this whole AI phenomenon? And a lot of those stocks have obviously done

really well? Or is it energy predicated on sort of supply-demand potential for crude to go higher or some probably combination? Well, you know, I was right there with you last year. I had the overweight that didn't work. And then I actually pulled it off on January. And it's still a market weight that I'm fond of, you know, is what I'll say is...

We generally are only overweight two or three sectors at a time. I wanted to upgrade utilities. I wanted to get some defense into the portfolio. The valuations there had improved. The earnings were coming in strong. I know they've had like, you know, a lot of AI related volatility. But we had done some work with our analysts to really compare enthusiasm levels and theses and that sort of thing to start the year. And it was clear to me there was more longer term opportunity in one than the other. So I downgraded it.

But we did say, you know, the valuations are super cheap. The earnings revisions are not cooperating right now. If we get the oil price to turn around, it feels like that will start to work again. It feels like it should benefit from the broadening trade. So I think to me, it's still at this point in time, a deep value opportunity in a rotation trade. I don't get too...

pulled into the geopolitics because I feel like anytime and this was why I stayed there last year right as I thought that there would be sort of this uplift from a dicier geopolitical environment and

And those all feel like fleeting trades that don't last. And we get excited for five minutes and then they fade. All right. So on the energy front, and I'm reading a lot about generative AI. I know that you're talking to a lot of clients, a lot of colleagues, that sort of thing. Guy and I are doing the same thing. And I've just heard some kind of goofiness of late. I remember hearing somebody, I can't remember where I heard it, but someone's like, oh, Sherman Williams.

is a generative AI play because if all these guys and gals, let's call it, are building out these massive data centers, okay, with hundreds and billions of dollars of, you know, spend, CapEx spend, that they're going to need to paint those walls. I mean, I,

I'm like, literally I'm hearing stuff like this. And then when you say, well, nuclear is going to be the solution because we have unprecedented needs for energy, you know, that, that from these data centers and the like to train these models and then inference and the like, well, it's not so easy to turn on a nuclear reactor that has been shut down for 40 years. Like those are, so you take the over on nuclear being, you know, the solve for this sort of thing. And I had your colleague, um,

Rishi Jalaria, who covers software and a bunch of these, like Microsoft's one of the big ones, but also Oracle, on the pod, I think, the other day. We had a great conversation. He's very bullish on Microsoft. He's very bullish on Oracle. We talked about the CapEx thing. One of the things that was really interesting, though, to me over the last week and a half is that

companies were getting rewarded in the quarters prior for announcing big CapEx numbers. They were willing to ask for forgiveness rather than permission. And over the last call week and a half, you saw Microsoft get hit when they had the combination of slightly, and it was

really slightly lower year-over-year cloud growth in Azure, but you had a CapEx number that was still pretty hot, like a lot year-over-year. The same thing happened with Google. So my question to you is like, I saw, to use your expression,

a vibe shift as it related to the generative AI trade. Go back two weeks to the deep seek frenzy or panic, you know, when NVIDIA, the largest market cap company in the world, the ground zero for the excitement in generative AI closed down 17% on a piece of news that we didn't know whether it was going to be bullish or bearish for all intents and purposes, you know? So talk to me a little bit about, there seems to be a lot of consternation around

about this trade that has been so concentrated and it's such a few names in which to play it as seemingly like in a pure play manner? Well, look, I think it's a maturing theme, right? And look, the thematic investing is not my strong suit. I'm more about like geography and size and sectors and industries and that kind of thing. But

you do tend to sort of, you know, I have the head in my head, a picture of a bell curve, right? And so like maybe we're coming down on the slope on the other side. But I think the

If I go back to last summer and we sort of look at the utility sector, right, like it was a cheap sector and all of a sudden they start talking about AI on their earnings calls and people are like, oh, this is cheap. We haven't owned this in forever. And here's a new reason. And I'm kind of tired of owning this other stuff anyway. I mean, there's this itch in the market to rotate even within this AI theme. Like I see that pretty clearly in talking to people. People want this rotation to work.

And so you got something that's kind of cheap and forgotten, people will move in. And I think maybe to some extent, you know, I've noticed a couple of the energy companies have been talking about this on their earnings call. And that seems, frankly, a little bit more enticing to me than like the retailer or the online travel company that's like, hey, we built a catalog or, you know, like, oh, we have this really cool new chatbot. And I'm like, do you know how much I hate chatbots? Like, you're not exciting me. So I think it's just that broadening out and that maturing and

frankly, if there's value, a reason, you know, a reason to own it.

Introducing Event Contracts from CME Group for individual investors who want a new, less complex way to trade some of the world's most recognized futures markets. They're smaller, lower cost, with predefined risk. Event Contracts let you trade your views on daily up or down price moves in equities, gold, oil, and more. The markets you know and use every day.

Take a position by choosing a side with event contracts from CME Group. Learn more at cmegroup.com slash eventcontracts.

iConnections is the world's largest capital introduction platform in the alternative investment industry. They bring the asset management community together through a membership platform that lets allocators and managers meet and connect both physically and virtually. Over 3,000 allocators and 600 managers are part of the iConnections community, overseeing nearly $48 trillion and $16 trillion in assets, respectively.

They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. With Robinhood Gold, you don't need a silver spoon to eat up the financial favors of the 1%. Robinhood Gold allows others to get the rates and perks usually reserved for the high society. Now the resourceful individual with Robinhood Gold can

can earn the very liberal rate of 4% APY on uninvested cash and be rewarded with a handsome 3% retirement boost on qualifying IRA contributions. Robinhood Gold provides the privileges of a high net worth for

any net worth. These generous benefits are now available for only $5 per month. The new gold standard is here with Robinhood Gold. Sign up at Robinhood.com slash gold. Terms apply. For product-specific disclosures, visit Robinhood.com slash gold. Investing involves risk. Rate may change. Limitations apply to the retirement boost.

The CastSweep program and IRAs offered by Robinhood Financial LLC, member SIPC, a registered broker dealer. Gold membership is offered by Robinhood Gold LLC. Indulge me for a minute. You're nodding your head. I'll try. Please. Dan, what's the cheapest thing you can do? Pay attention. Pay attention.

- Laura, you've been on this podcast, this is probably the fourth time, I don't have it in front of me, but it's fair, right-ish? - I think three or four times. - Three or four times. And you've been on Fast Money many times. And you've been on the television many more times than that. And I do pay attention to when you talk. And if you've listened to the first 30 minutes of this podcast,

what you've gleaned is you don't just do things unilateral. You talked about speaking with your derivatives people, speaking with different analysts, being collaborative in terms of how you... There's a process. It's not just you licking your finger. Yeah. Speak to the process. So, you know, I would say...

I'm sort of a researcher at heart, right? Obviously, I sit in a research department. I didn't study math, but I'm good at math and I'm good at numbers and I'm a visual person, right? And I'm also a very skeptical person, right? So I'm not somebody who's just going to sit here and accept what somebody tells me. I'm going to go do the work myself. So on my team, you know, I would say there are sort of maybe three or four prongs. Let's see if I can think about this correctly. But I would say, number one, we go off and we do our own work.

Right. And we have spent years setting this up quantitatively. Our ESG strategist is my old associate, Sarah Mahaffey. She worked with me for 10 years before we got to before she became the ESG strategist. And so she helped me build just an incredible quantitative setup. And we have a weekly our weekly pulse. It usually comes out on Mondays. I think it's up to like one hundred and forty six pages or something now. But I will tell you on Thursdays.

My team is basically at the office updating everything. And what I tend to do on Thursday nights is I go through everything and I look at it and there are actually a few slides in there I update myself. And then, you know, I tend to not really go out and talk to people on Fridays because I'm sitting at my desk and I'm looking at everything and I'm thinking and I'm reading and I might ask questions of people, but that is, you know, sort of my thinking cap day.

And so I have that process every week and I look at the same things over and over and over again. We also think about the market in terms of, I always get verticals and horizontals confused. Horizontal is this. Is the layers. And I won't tell you why I know that, but there's a certain profession that requires you to be horizontal. Horizontal.

That's how I remember it. Please continue. But if you think about like the pyramid, right, like we've got the S&P as the top layer. And then we sort of have within that we've got our sectors. We've got industries. We look at small caps. We look at mid caps. We do a little bit of global on the periphery. So maybe now I'm getting into like concentric circles. But we very much think about all that. We look at valuation. We look at sentiment. We look at fundamentals. We look at the economy. We look at policy. We look at flows.

And then, as you said, like I talk to people. So I have a fantastic macro team. I'm constantly talking to Amy, our derivative strategist, Blake, our rate strategist, Frances, our new economist. She actually used to be a client.

And I am not trying to solve, I'm not trying to do everybody's job for them, right? Like I will tell them what I think, I will tell them what I'm seeing, but we talk and we don't all have to agree. I very much believe in a free marketplace of ideas, but I do try to take cues from my colleagues. I talk to my analysts and I'll say, "Hey, I read this in an earnings call. What do you think about this?" And they'll come back and we'll talk back and forth a little bit. And then that also goes to, you know, what am I doing this week? I'm sitting at my desk reading earnings calls.

And, you know, I know people like, "Oh, do you use AI? Do you use keyword searches?" And I'm like, "Well, I like to read. How do I know what I'm looking for if I don't read it?" And so I will use those tools to supplement, especially when things get busy.

But I want to see what the companies are saying. And then I put that together with the data and what we all think macro wise. It is art. It is not science. There are scientific tools, but it is very, very regimented and process driven. All right. So we've had this conversation before and hopefully you remember, but for any new listeners,

How frustrated are some of your clients because your work is so matter of fact and we work in such an emotional industry and I'm sure you get people like, "How come you're not paying attention to this? How can you not be looking at this?" They're looking at it through the emotional lens of all the things that we talk about. You're looking at it through a very pragmatic lens and just the data is what it is.

Those must be some really interesting conversations. So, you know, I will say I always say there are people who like me and people who don't and people who don't. That's just fine. I get it.

But I think as I've gotten older, I mean, I've done this almost 25 years. I started out at City when I was, you know, I'm not going to tell you how old I was. No, I can do the math. I was right out of college. He's good at math, too. And working for our old friend, Tobias Levkovich. Sure. But, you know, I've done this a long time, and I would say sort of midpoint in my career. I probably got some very bad advice.

from people who are managing me. And, you know, I think it was well-intentioned, right? But there was just this sort of moment of like, well, people just want conviction. People just want storytelling and people just want narratives. And I think for a while, at like that midpoint in my career, I tried to listen to that advice.

And at some point, I just decided that's not what I do. If that's what you need, go talk to somebody else. And I'm going to do what I do well. And if it helps you, I'm so excited. If it doesn't help you, I'm not for everybody. Right. But that's my point. That sine curve of every once in a while, you know, that sine curve will align with people that are the emotional ones. Your flat line of non-emotional people.

But it's the bell, it's the upper arc and the lower arc, which frustrates... And it has nothing to do with you. It's just the nature of our business. People want to be really enthusiastic or really unenthusiastic. And you're playing it right down the middle of the fairway. Right. And look, I think...

What I've done, I've been through enough cycles at this point, right? And I've been through enough crises. Like I was thinking about my home building analyst, Mike Dahl. We used to work together at a different shop and I was trying to count up the number of like crises we've been through together. He's always one of my like, you know, trusted calls. But, um,

I've been through this enough to know that that process is really going to help you when you're trying to identify extremes in either direction, when things have gone too far in one direction or too much to the upside or too much to the downside. And that is, I think, what people who have stuck with me over the years have learned to appreciate is that I can keep a calm, cool head and not just focus on yesterday's story when you're at those extremes. We've stuck with her.

Well, that's why I respect the shit out of you. No, I mean, because I admire that. Like, obviously, I'm wired much differently. I'm a bit of a flake and a bit of a... But I appreciate the work and the integrity and the honesty that's required to be able to do that work in an industry that begs people to be, you know, one side or the other. Well, she's kind of the Jalen Hurts.

Can I tell you something? I like what you did there. I like what you did there. He's a stone cold assassin. Does not change. I love him. Yeah. Really quickly, and this is not a shameless plug because we've been using this tool, I want to say for a few quarters now since it was released. So FactSet introduced what they call transcript updates.

So on a bunch of days like we've had over the last couple weeks where there's like a couple dozen earnings reports that you really want to get eyes on, that sort of thing, this thing gives great summaries. It's really, really good. And it's not – like I know what you said, like you want to read it. This is something that has been a huge, huge time save for us over the last couple quarters. My team and I have debated how do you use those kinds of tools. And again, I go back to we have to know what to look for to begin with. And I think I also realized –

You know, there's value in the higher level summary and sometimes you have to like do that, right, and get through. It's also like the little nuggets and the little crumbs of information. And you can actually find the crumbs a little bit easier if you do have some of those aggregation tools. But you still have to dig in. Well, listening...

to the Q&A on calls is like invaluable, right? Anybody can read the transcript that they put out, but listening to Tim Cook and listening how the CEO of one of the largest market cap company in the world is explaining growth in China that was down 11% year over year, that sort of thing is pretty fascinating.

That's a good segue here. So you mentioned that you look around the world, right? And that's an important input. How are you feeling about global growth right now? Because China is obviously doesn't get any better, right? And so, you know, last year, there was a lot of talk about the deflationary spiral that they're in. If the trade war gets dialed up, it's going to be a bit of a disaster for the economy. It could be unsettling for China.

President Xi, you know, just politically. So how are you thinking about global growth? And is China the flashpoint that a lot of folks think it is? So, you know, I don't disagree with anything you said regarding the trade war. I do think if I kind of go back to my own work and just get all the digging on the transcripts and I kind of marry that up with conversations, I

China just doesn't come up in my conversations a whole lot. Now, I am a U.S. strategist, but even when I'm talking to the global crowd, it feels like it's more of a trade than a long-term investment. So I think it's sort of limited to a certain cohort. I think the other thing is if I just go back to earnings call transcripts, I really monitor closely just the tone companies have around whether it's Europe or China or anything else that's outside the U.S., and it just doesn't feel like it's getting all that much better. Like,

There's a you know, sometimes we'll read a week right and it feels a little more mixed and sometimes we read a week and it feels like it's a little more negative it kind of depends on the sector mix But it just doesn't seem like we're getting a lot of you know Kind of excitement and green shoots even putting this tariff issue aside the great Cass Elliott one of the great voices in rock and roll history died much too soon by the way saying a song it's getting better every day Dan and

the gold market is getting better each and every day. Is that in your work a warning sign or it's just sort of its own animal at this point? - I think to me it's its own animal. We have a great gold strategist, Chris Looney, who works closely with Halima Croft. - Wait, Chris Looney, Canadian, Chris Looney? - He's not actually,

I don't think he's actually Canadian. Are you sure? I don't think he is. That's pretty cool. I know. And if he was a currency strategist, that would have been amazing. Sorry. No, it's fair. But I tend to shift the gold questions over to him. But I will say, I think, you know, from his work, it feels like there are so many different things driving it. It's almost kind of pick your narrative. Yeah.

All right. So let's talk about just your target again. Maybe we can close out on this a little bit because, you know, last year, I guess for the last two years, a lot of S&P performance has been driven by multiple expansion on this secular shift that has dominated and we don't have to get in the concentration of.

Again, right? So you have a target that's about 10% higher than here. A lot of folks have kind of made the analogy of 95 to 99. We had five consecutive years of basically 20 plus percent returns for the S&P 500, also driven by a large secular shift that ultimately got into a whole host of other sectors, right?

So how do you think about the multiple expansion we've been in? A lot of folks are trying to make an argument that 22 times expected 13.5% EPS growth for 2025. That's fine. So I'm curious, how are you thinking about it? Is there a chance that we are trading at 7,600 by the end of the year?

the end of the year, which would put us 20% plus year over year. Yeah. Look, there's always a chance, right? I mean, and I think valuation work in particular is very imprecise. So I have one valuation model. It goes back to 1962. We use PCE 10-year yields and Fed funds to come up with a formula that projects where the trailing PE should be at the end of the year. And then we take...

different sets of assumptions, right? I can take RBC House views, I can take consensus assumptions, I can make up my own, put them into the model, and it spits out a PE. And I'll tell you, this thing worked beautifully two years ago, was spot on with the market. Last year, it was too conservative. This year, what it's telling me is

there's really not a case for multiple expansion. If I sort of put in either consensus or my rate strategist view of the world, and I think Blake is now like around, I forget if it's 4.6 or 4.5, but it's somewhere in there. You know, he doesn't have the Fed cutting anymore, and we've got like a pretty benign inflation view, so like 2% on PCE. The best number I can come up with for you there is like 22.8 times on the trailing P.E., and then that, if you put that against either my earnings number or consensus, that gives you like 6,200-ish on the S&P.

So I can't get very bullish from a valuation perspective, even with a flat multiple. If I bake in scary stuff, 3% PCE. Couple hikes, 5% on the 10-year yield. I can knock the S&P down to 5,600 in a heartbeat. So valuation is a problem for this market. Now, that doesn't mean it's going to be the precision tool for this year. My model over time only has a correlation of about 54%.

And that's with a lot, a lot of hard work. So it's tough. But I do think generally what I've learned from that model is we got a lot of expansion as inflation was coming down. Now, we don't have inflation coming down anymore and the risks are to the upside. The risk on the interest rate story is to the upside. Maybe it's flattish.

We're probably not going to get any more cuts from the Fed. So where is your expansion coming from? I just don't see it. You're going to have to do it with earnings. And so, you know, I have this 10-ish percent target. I think I've got like 11, 12% on the earnings growth number, right? That all kind of makes sense to me. From 1958 to 1982, Bear Bryant was the head coach of the University of Alabama. They won six national championships during that tenure. Ray Perkins took over.

Bill Curry then, Gene Stallings, who won a national championship. I think he handed it over to Mike DuBose, a guy named Dennis Franquillon coached Mike Shula. Dark years for Alabama. You would agree with that? Dark years. I don't know football that well. But you do know Alabama. I am from Alabama, yes. Nick Saban takes over in 07, goes on a historic run.

Like the market is cyclical, so is college football. Are we looking at the dark days for your home state of Alabama? I am never going to bet against Alabama football. And I will tell you, even my husband, who grew up not in the South but in the Northeast, has become a huge Tide fan. So politically, I can't comment on that one. But I would not bet against them. Well, and I wouldn't have been against you, Lori Calvisina, because your work is extraordinary. And it's always a joy to have you join us.

On the Risk Reversal podcast. Which she kind of likes. I think she's kind of tied to the old name, but you know. It sounds very contrarian. Well, what we're trying to do really quickly, we're trying to streamline the content. So we had a couple podcasts. We were doing the same format, but one was focused like this and the other was focused on tech. And we just think that they're all kind of intertwined at this point. So we wanted to kind of lean into the brand. Like a spider's web. Like concentration.

Yeah, so we're kind of concentrated here. Guy and I are a little too close to each other on the desk, but we'll make that work. Lori, we really, really appreciate you being here. Thanks so much. Thanks for having me. It's always fun.