Investing.com -- RBC Capital Markets head U.S. strategist Lori Calvasina has slashed the firm’s year-end 2025 target for the S&P 500 to 6,200 from 6,600, marking a 6% cut.
The revision aims to reflect updates to RBC’s economic and rates strategy, which now anticipates slower GDP growth and persistent inflation.
Calvasina noted that the new target aligns with the median of five valuation models RBC uses to assess market direction. These models generate a wide range of outcomes, from below 5,700 to over 6,500, highlighting market uncertainty.
"Our cross asset and sentiment models both yield outputs close to our new target," Calvasina wrote, while acknowledging that deep levels of bearishness among investors have historically preceded market rebounds.
RBC also lowered its 2025 earnings forecast for the S&P 500 to $264 from $271. The revised estimate factors in weaker economic growth projections, a strong U.S. dollar, and corporate caution on margins.
"We’ve also removed the modest margin expansion that we had been forecasting," Calvasina noted. “This is a move that we think is prudent as we suspect it will be difficult for management teams to plan around the new trade policy which has been in flux.”
RBC also revised its bear-case scenario for the S&P 500, cutting the year-end level to 5,550 from 5,775. This scenario assumes a more significant market drawdown, akin to past growth scares, and incorporates more pessimistic assumptions across key valuation models.
RBC’s GDP model, which forecasts economic growth in the 0.1%-1% range, signals that a sluggish economy could lead to double-digit stock market declines.
The market’s recent struggles have been driven by a confluence of factors, including shifting investor sentiment and mixed economic signals.
RBC’s analysis suggests that while some indicators point to excessive pessimism, others indicate further downside risks. The firm’s base-case forecast assumes that the recent market low will hold, but if conditions deteriorate, the bear case could come into play.
“Our base case price target of 6,200 assumes that the March 13th low holds, or that the index won’t break much farther below it. If it does, we think our bear case likely kicks in,” Calvasina said.