RBC Capital Markets Sector Weight Adjustments
RBC Capital Markets announced a reallocation of its sector weightings, upgrading health care to overweight from market weight while downgrading technology and materials to market weight from overweight.
Lori Calvasina, RBC’s head of U.S. equity strategy, explained that the health‑care upgrade is driven by improving fund flows into the sector, a positive earnings and sales revision profile, and valuations she described as attractive. The sector also performed well in RBC’s analyst survey on risk questions, scoring most positively on the implications of a weakening AI theme.
The technology downgrade is attributed to the sector trading slightly above average on both an absolute and relative median price‑to‑earnings basis, a pattern observed since the late 1980s. Although global developed‑market tech fund flows remain positive, they have weakened, and earnings‑estimate revisions for semiconductor and semiconductor‑equipment stocks have decelerated, even as software valuations and earnings revisions stay attractive.
Materials was reduced to market weight because, despite attractive valuations, it now exhibits one of the weaker earnings‑revision profiles in the index, leading RBC to view it as having a neutral rather than an overweight outlook.
RBC’s broader stance continues to be overweight on financials, underweight on utilities, and market weight on industrials, staples, energy, and consumer staples.