Bloomberg Surveillance · Sep 28, 2026
With Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets
Every interest-rate hiking cycle since the mid-1990s, leaving out 2022, began with the stock market falling about 8% to 14%, according to RBC Capital Markets' research.
The S&P 500 had a mostly sideways summer and has not had that fall this time. Lori Calvasina said the risk of a 5% to 10% drop has gone up, and higher bond yields are making a deeper one more likely.
"So you do tend to see some turbulence around liftoff, and we haven't really gotten that yet."
Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, on Bloomberg Surveillance, has been a lead strategist since the financial crisis and got her first job offer in markets in March 2000, at the peak of the tech bubble. She sorts every market fall she has lived through into four tiers.
The full segment is covered here so you can skip it.
Here are the 6 takeaways that matter.
Key Takeaways
A 5% to 10% drop is still RBC's base case, and every rise in bond yields makes a 14% to 20% fall more likely
Hiking cycles since the mid-1990s opened with falls of about 8% to 14%, and this one has not had its fall yet
Her four tiers of fear run from an ordinary 5% to 10% dip to losing half the market's value
Since the financial crisis, a fall past 10% has tended to run to about 14%
If you do not fear a recession, buy the market about 10% down, she told hedge funds in March
The usual midterm pattern did not hold in 2018 or 2022
RBC cuts the consensus earnings forecast by 10% and still finds earnings growth offsets lower valuations
1. The Liftoff Selloff
The host said stock indexes had had a good year so far and asked how Calvasina sees the setup for the fourth quarter.
She said RBC is not trying to call where the market ends the year. It has said the risk of a 5% to 10% drop has gone up.
Higher bond yields raise the odds of a bigger fall
"And in our weekly today, we also said, you know, that's still our base case, 5% to 10%, but every little bit you add here on the bond yield is pulling up a Tier 2 risk." — Lori Calvasina
Tier 2, as she explained in the next answer, is a fall of 14% to 20%.
Every hiking cycle since the mid-1990s started with a drop
RBC focused on the start of interest-rate hiking cycles in a note a week or two earlier.
"And it was really fascinating because we went back and we looked at all the liftoffs since the mid-1990s." — Lori Calvasina
"We kicked out 2022 because that one was just longer and deeper and very different than the others." — Lori Calvasina
"And otherwise, the median drawdown that you saw sort of at the beginning of the hiking cycles was about 9.6%, and they ranged from about 8% to about 14%." — Lori Calvasina
This cycle has not had its drop yet
"So you do tend to see some turbulence around liftoff, and we haven't really gotten that yet." — Lori Calvasina
"We had a sideways summer for the most part, but we think the risks are piling on." — Lori Calvasina
