Episode summary
Bull Case Holds for 2026 – Lori Calvasina
The Master Investor Podcast With Wilfred Frost
· · 50 min · Hosts: Wilfred Frost · Guests: Lori Calvasina
Summary
Lori Calvasina argued that the market’s recent 9.1% peak-to-trough decline around the Iran war was a rational response because recession risk was not being priced in. She said company transcripts show inventories, hedges and supply-chain buffers that can cushion the impact for now, and that many US companies are still confident about managing through near-term disruption. In her view, the main pressure from higher oil, tariffs and geopolitics is more likely to show up in 2027, once those buffers start to run out.
Her RBC framework uses five models: sentiment, cross-asset signals, valuation and earnings, GDP, and a Fed model. The headline S&P 500 target is 7,900, which she called constructive but not heroic given the index’s recent level and the current multiple near 23.6x next-12-month earnings. She said the market is still not cheap, but it is also far from the 28x peak reached last fall.
Calvasina was most upbeat on the Fed and cross-asset models, while GDP was the most cautious. She said AI-linked companies remain in the “fast lane” for earnings growth, with energy and materials also standing out, while most of the rest of the market looks sleepy. On positioning, she preferred large-cap growth over small caps for now, even though she sees some valuation and cyclical support for small-cap stocks later on.
Key takeaways
- Calvasina said the Iran-related 9.1% drawdown was consistent with a market that is not pricing recession.
- RBC’s S&P 500 target is 7,900, based on a five-model framework that blends sentiment, cross-asset, valuation, GDP and Fed inputs.
- She said next-12-month S&P 500 valuation is around 23.6x earnings, down from roughly 28x last fall, leaving some room to run.
- She sees AI-linked earnings as the market’s fast lane, with energy and materials also showing relative strength.
- She thinks 2027 is the bigger risk year because supply-chain buffers, hedges and inventory protection may start to fade.
- She prefers large-cap growth over small caps near term, even though small caps could look better later if earnings continue to recover.
Notable quotes
“we think there's still a little bit of room to run on that basis”
“we think the S&P 500 is a buy or a sell, is it just the data, the hard data”
“We are not cheap and we never got cheap, you know, with this this 9.1% draw down we saw around the war”
How the episode opens
What was the peak to trough drop recently with the Iran war? — 9.1%. — So quite small,
But look, it it was rational. And so, you know, we we sort of look at that 9.1%. And that's about what the market should do if you are not putting recession on the table.
And as concerned as the geopolitical community has been about this, I do think the market did what it was supposed to do. if we're not having a recession or seriously concerned about one. I would say as we have read through company transcripts, we are really hearing a lot about buffers in terms of inventories, hedges that are in place and we're also really hearing a lot from companies about their ability to manage through tough times.
And I can't tell you in this last reporting season how many companies I saw referring back to COVID, referring back to tariffs, patting their supply chain teams on the back and saying what a great job they're doing and really projecting a lot of confidence about their ability to manage through. If I just sort of think about a very basic kind of next 12 months S&P 500 PE um that one is sitting on our last update I think around 23.6 times. What we saw back in the fall was it was around 28 times.
We are not cheap and we never got cheap, you know, with this this 9.1% draw down we saw around the war. I think the lowest number we recorded was maybe around 22. Um, but it's certainly not back to where it was.
So, we think there's still a little bit of room to run on that basis. Welcome to the Master Investor podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders, and politicians in the world, giving you, our listeners, the edge.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- sp500 forecast 2026
- equity valuation pe
- investor sentiment
- fed outlook
- ai growth and supply chain resilience
Companies and tickers mentioned
- RY
- RBC Capital Markets
Watch the episode
Watch “Bull Case Holds for 2026 – Lori Calvasina” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Master Investor Podcast With Wilfred Frost, this episode and its artwork belong to Paradine Productions. Octagon is not affiliated with the show; this page is an independent summary.
