Welcome to RBC’s Markets in Motion podcast, recorded September 25th, 2026. I’m Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets. Please listen to the end of this podcast for important disclaimers.

The big things you need to know: First, we reviewed the drawdowns in the S&P 500 of 11% or more dating back to 1956, an exercise that helps to clarify why US equities have been resilient recently (in particular, strong earnings and capex dynamics). Second, other things that jump out in our updates include the link between crude oil and 10-year yields, the renewed leadership of the US and mega cap growth trades, the lack of movement in consensus EPS forecasts for most sectors (ex Energy, Mag 7, and Tech) in September, the slight softening of C suite confidence we saw in the latest Duke CFO survey, and the surge in expectations for a Democratic sweep in betting markets.

If you’d like to hear more, here’s another five minutes.

Starting with Takeaway #1: Digging Into The Major Drawdowns of the Past

A year and half ago, we formalized our Four Tiers of Fear framework for navigating equity market drawdowns. That framework is largely based on our own experience in financial markets over the past 26 years, and the mostly on the periods of turmoil we’ve personally lived through. Since we put the Tiers of Fear together, we’ve been thinking about what we might learn by taking a longer look back at major drawdowns.

So, we’ve compiled a list of all of the drawdowns in the S&P 500 that have totaled nearly 11% or more since 1956, based on peak to trough moves from the index’s most recent all-time high at the time. In what we suspect is an imperfect timeline, we’ve also attempted to highlight what financial market, economic, major cultural, and geopolitical events occurred during or close to them. We’ve been tinkering with this chart on and off for many months as a side project. After the Iran war began, it occurred to us that the event studies that we and most other strategists do – a list of how stocks perform after a certain type of event occurs – may not always capture the significance of those events for the stock market. Sometimes, these events are part of a broader mosaic. The time we spent on this exercise reminded us that looming recessions, rising interest rates, extended valuations, geopolitical shocks, domestic political anxiety, sharp oil price moves (not always in the same direction), major wars, unforeseen shocks, and festering conditions that eventually led to systemic issues were all recurring ingredients, even if they didn’t show up every time, helping to explain why so many investors we speak with have been so edgy in recent years.

We also spent some time reviewing trends in major economic, sentiment, and financial market indicators with these major drawdown periods highlighted, which did a better job than our bar chart of reminding us what the more severe periods of market stress have in common. Problems on the earnings front are a clear and repeat offender, with declines in corporate profits growth broadly and, in recent decades, extended periods of downward revisions to bottom-up consensus (sell-side) earnings forecasts.

Sentiment gauges tend to fall sharply while economic uncertainty tends to rise sharply. Layoffs and/or job losses tend to materialize, though the latter, often later on in extended drawdowns.

Real GDP tends to contract or come close to doing so, even when a recession is avoided, and other business cycle/capex related indicators like ISM manufacturing, ISM new orders, and industrial production growth tend to move down.

All of this is well known, but seeing it in chart form, and comparing trends in place today versus the trends in place during and around these periods of turmoil helped to clarify some of the reasons why equity markets may have been resilient of late. Most notably, corporate profitability is on the upswing, and earnings forecasts are still being revised to the upside. Consumer confidence has already been hit quite hard, and investor sentiment is already well off its highs and never made it back to typical highs in recent years. Industrial barometers like ISM manufacturing, ISM new orders, and industrial production growth are also in the early innings of recovery, even though capex spend in dollar terms for the S&P 500 has been near past peaks.

Could these indicators weaken, particularly in the wake of a new hiking cycle by the Fed and the move up in bond yields that’s been seen, helping to spark something more nefarious than the 5-10% drawdown we’ve been anticipating? Absolutely. But for now, the stock market is taking an innocent until proven guilty approach. We are keeping a close eye on all of these indicators going forward as hikes get underway.

Moving on to Takeaway #2: What Else Jumps Out In Our Latest Updates – for the sake of time, we’ll focus on performance, earnings, and c suite sentiment

• The Growth trade strikes back. The lack of clear leadership in the US equity market is a topic that has been in focus in a number of our recent client calls. The good news is that in our latest batch of performance updates we’ve seen evidence that the market is finally making a move. Within the Russell 1000, we’ve seen a burst of new leadership for Growth over Value. Within the S&P 500, this has also been the case for the Top 10 market cap names.

o And while the US/non-US developed market trade is still technically stuck in the range that’s been in place since May for this trade, there has been a burst of US leadership in mid September that’s emerged which has taken this relationship up to the high end of that range.

o At the sector level, Tech (a major piece of that mega cap Growth trade) remains the top performing S&P 500 sector since late July, and while Energy (a component of the Value trade) is still technically doing well since late July, it has admittedly stumbled in recent trading as investors have pondered whether the UN meetings in NYC might improve the outlook for the war. Note that despite the resurgence in the big cap Growth trade, we’ve continued to see underperformance by Utilities and Industrials – which have been the most expensive sectors in the S&P 500 on our model and tied to the AI picks and shovels trade, suggesting that investors are also derisking this theme to some extent.

o One bit of bad news for those desperately seeking direction is that US valuations have moved back up to their five-year average vs. non-US developed market equities. While we don’t see an overvaluation problem for US equities yet on this data set, further outperformance may soon get us there.

• All quiet on the earnings front. We’ve been keeping an eye on trends in bottom-up consensus sector EPS forecasts for various time periods. Given that a number of conferences have occurred around the Street in September, we were surprised to see that there hasn’t been much change in these forecasts since Labor Day. Energy has moved up fora 3Q26 and 2026, Mag 7 has moved up modestly for 2026 as well as 2027, and the broader Tech sector has moved up modestly for 2027. This dynamic helps explain to us why the stock market has been struggling to find new leadership despite an innate desire of many investors to rotate and why Tech has clung to leadership despite the debate over AI safety that has emerged in recent weeks.

• C-suite confidence softens slightly. We always like taking a look at the Duke CFO survey each quarter, as it tends to be released shortly before reporting season starts up. This quarter, CFO views on one's own company and the economy softening a tiny bit but remained well within the middle part of their post COVID range. Optimism on one’s own company continued to track higher than optimism on the broader economy, highlighting the ongoing confidence in the C suite of their ability to manage through challenging conditions. The survey was taken before the latest Fed meeting, and also indicated that monetary policy has become companies’ biggest concern.

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