RBC Capital Markets chief U.S. equity strategist Lori Calvasina shared her thoughts on where investors should look for outperformance in 2019 in an exclusive interview for CNBC PRO with Mike Santoli.
Calvasina explained that she's keeping an eye on the relatively cheap financial stocks, which she said appear more insulated from a number of macroeconomic headwinds.
"The financial earnings expectations are holding up very nicely. So that's what I'm really looking for, is where the downward shifts are and where the upward revisions are," Calvasina said last month. "And I can't really think of any major problems coming around the bend on financials and I think the valuations are very cheap. So that's a sector I have some comfort on."
Wall Street's big banks have fared well thus far in 2019 on the heels of lackluster performance in 2018. Goldman Sachs, Citigroup and Bank of America are all up at least 14 percent since Jan. 1. Large regional banks BB&T and SunTrust are also up big after the two announced their $28 billion merger earlier this week, the largest bank marriage in the post-crisis era.
The strategist was less sure on industrial stocks thanks to elevated profit expectations.
"When I look at industrials – this is one I'm neutral on. I've started to get interested in the valuations, but I'll tell you what's bothering me is that the margin expectations are still really high," she added. "It's one of the highest sectors in terms of the percent of companies where expansion is anticipated and the degree of expansion that is anticipated."
Calvasina also discusses:
- Her 2019 S&P 500 target and earnings outlook
- Her thoughts on investing in small-cap equities