Lori Calvasina ofRBC Capital Markets told Bloomberg there's a "historic valuation opportunity" in small-cap stocks.- However, the chief US equity strategist said the opportunity should only be for long-term investors with a three- to five-year horizon.
- She recommended to everyone to look for the "best in the cyclical camp, the defensive camp, and the longer-term growth camp" to play what she sees as a volatile recovery ahead.
Lori Calvasina, RBC Capital
Short-term investors with a six- to 12-month time horizon should "stay neutral," Calvasina said, given that there are doubts about the trajectory of the economy in the near future.
The strategist also said she thinks small caps are "functioning the way they typically function as cyclical expressions of confidence in the market," and added, "we think one of the reasons frankly they haven't broken out in a bigger way is that there are still all these doubts about the near-term trajectory of the economy."
On the other hand, investors with a three- to five-year time horizon who can "ignore the noise of next year" can take advantage of this small-cap opportunity, she said.
"Small-caps are historically cheap relative to large caps, so we think you're going to be in a good place in this trade on a three- to five-year view but in the next six to 12 months our confidence is lower," Calvasina said.
Calvasina is expecting a long, uneven market recovery with a lot of volatility. She recommended to buy "the best in the cyclical camp, the defensive camp, and the longer-term growth camp and not try to chase all these little individual moves," referring to the recent surges in individual stocks like Home Depot.
She also echoed her previous take that within