Today in the podcast, an update on our outlook for sectors within the US, and some thoughts on sectors from a global perspective based on the results of our latest RBC analyst survey which now includes our teams from Europe, Canada, and Australia in addition to those in the US.

Five big things you need to know:

• First, across the globe, RBC equity analysts are most constructive on Health Care and are least constructive on Consumer Staples.

• Second, RBC analysts are most constructive on Europe in terms of their performance outlooks, but there is some important nuance to their regional views.

• Third, looking at the US specifically, our analysts are most constructive on the performance outlooks for Health Care, Energy and Financials, and are least constructive on the performance outlooks for Consumer Discretionary, Consumer Staples, and Utilities.

• Fourth, in terms of our own US Equity Strategy sector recommendations, we have made two changes, lifting Financials to overweight from market weight and lowering utilities from overweight to market weight.

• Fifth, cyclicals also stand out in our survey and quant work on Europe.

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1. Starting with Takeaway #1: across the globe, RBC equity analysts are most constructive on Health Care and are least constructive on Consumer Staples at the sector level.

• Questions in the survey focused on views on performance, valuations, demand, margins, AI, company liquidity in the aftermath of the banking crisis, whether our analysts are seeing evidence of recession pressures in their industries, and how views on the macro have changed. The analysts gave us numerical responses in a range of +/-2 from most to least constructive.

• Taking all regions into account, our analysts were most constructive on the performance outlook for Health Care and were least constructive on the performance outlook for Staples. Those biases were also in place we look across our teams’ views on all questions.

2. Moving on to Takeaway #2: at the regional level, RBC analysts are most constructive on Europe in terms of their performance outlooks, but there is some important nuance to their regional views.

• While the performance outlook was strongest for Europe, it’s worth noting that the performance outlook did tilt positive for all regions except APAC/Australia where it was basically neutral.

• Valuations are seen as most attractive in Canada and least attractive in APAC/Australia.

• Margin pressures are seen as most acute in APAC/Australia.

• The US is seen as benefiting most from Artificial Intelligence, with analysts in most sectors anticipating a positive longer-term impact from it, not just the Tech-related ones.

• Overall, the general message from our survey was that our analysts have a modestly constructive view of things. Tilts were modestly constructive on all of the questions we asked except for margins and recent shifts in macro views both of which tilted very slightly negative.

• Optimism was strongest on our questions about AI and evidence of recession.

3. Moving on to Takeaway #3, looking at the US specifically, our analysts are most constructive on the performance outlooks for Health Care, Energy and Financials, and are least constructive on the performance outlooks for Consumer Discretionary, Consumer Staples, and Utilities.

• Across all sectors, our US analysts veered towards neutral on most questions, aside from those on the longer-term impact of AI and the impact of the recent banking crisis on company funding/liquidity, where they tilted a bit more constructive.

• Only a few sectors stood out with a negative tilt on our recession pressure question – most of our analysts said they aren’t seeing evidence of one, even though many indicated that their concerns about the macro backdrop had grown a bit in recent months.

4. Moving on to Takeaway #4: in terms of our own US Equity Strategy sector recommendations, we have made two changes, lifting Financials to overweight from market weight and lowering Utilities from overweight to market weight.

5. Wrapping up with Takeaway #5: cyclicals also stand out in our survey and quant work in Europe.

• We aren’t making formal recommendations on other regions, but are flagging some of the more interesting sectors from our survey and quant work.

• Within Europe, one of these is Financials. Our research team is constructive in their performance outlook for the sector, and this is in alignment with our data on revisions (where Financials counted among the stronger sectors) and valuations (where Financials look attractive). Our European team’s constructive stance is contrarian from a local flows perspective, but syncs up well with the views of our US analysts.

• Another sector that jumps out to us on our European work is Industrials. On our quant data, EPS and sales revisions for the sector have been strong, but money flow impacts have been mixed, and valuations are extremely high making their modestly positive performance outlook somewhat contrarian. Our European team stands in contrast to our US team, which is more cautious on performance.

That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.