Asking about stress testing fundamental view for $100 oil scenario and duration impact.
Sarah
Lori Calvasina
Used valuation/earnings model with 2022 (5% earnings growth) and 2015-16 (flat earnings) scenarios, baked in 3.6% headline inflation from RBC economists' $100 oil stress test, added 4.5% 10-year yield stress, kept Fed flat.
Asking about tactical picture, whether market is washed out, and PE compression since October.
Sarah
Lori Calvasina
Forward PE down to 23x from ~25x weeks ago; 2022 low reached long-term average of 18.5x, suggesting more downside possible; prefers Russell 2000 as stress barometer - small caps at 16.1x vs 15.2x average, with 11-13x indicating recession pricing.
Asking about history of oil spikes on corporate earnings - duration and impact magnitude.
Sarah
Lori Calvasina
Found -40% inverse correlation between stocks and oil in post-COVID environment; only energy sector outperforms, rest shows degrees of underperformance; healthcare shows resilience.
Asking whether impact is just near-term based on oil move or depends on duration.
Sarah
Lori Calvasina
Duration matters; surveyed analysts assuming oil at $100+ for extended period and conflict lasting >4 weeks.