RBC Capital raises year-end S&P 500 target, but sees ‘choppy’ action after big rally

RBC Capital Markets has raised its year-end S&P 500 forecast to 6,350 from 6,250, citing stronger corporate profits and an increased 2025 earnings outlook of $269. Despite this upward revision, which places the target approximately 4% below current trading levels, strategist Lori Calvasina remains cautious, anticipating choppy conditions through year-end 2025. Key concerns include stalling valuations, a recent decline in individual investor bullishness, potential retail investor fatigue, and an equity market priced for perfection amidst uncertainties regarding tariffs, inflation, demand, and labor market health in the latter half of the year. A 7,100 target for 2H 2026 was also provided.

Analysis

RBC Capital Markets has raised its year-end 2025 price target for the S&P 500 to 6,350 from 6,250, a revision primarily driven by an increased full-year 2025 earnings forecast to $269 per share from $258. However, this updated target implies a potential 4% decline from the index's current trading levels, underscoring a cautious near-term outlook. Strategist Lori Calvasina anticipates choppy market conditions through the end of 2025, citing several key concerns. These include poor seasonal patterns in September and October, stalling valuations among mega-cap stocks, and signs of fatigue among retail investors. Furthermore, the analysis points to a recent drop in net bullishness in AAII polls as a leading indicator of short-term declines. The core risk highlighted is that the equity market is priced for perfection at a time of rising fundamental uncertainty, with the true impact of tariffs on corporate profitability and inflation expected to materialize in Q3/Q4, alongside emerging questions about the health of the labor market. Despite this near-term caution, RBC issued a more constructive price target of 7,100 for the second half of 2026, suggesting the current period may be one of consolidation before a future advance.

Key Decisions for Investors

• Investors should prepare for market choppiness and a potential consolidation phase, as RBC's revised 6,350 year-end 2025 target implies a roughly 4% downside from current levels despite an upgraded earnings forecast.
• Closely scrutinize Q3 and Q4 corporate guidance for impacts from tariffs and shifts in consumer demand, as the market's 'priced for perfection' stance creates vulnerability to any negative earnings revisions.
• Monitor technicals for stalling momentum in mega-cap names and be aware of negative sentiment shifts, such as declining individual investor bullishness, which RBC identifies as a leading indicator for short-term declines.
• Longer-term oriented portfolios might view any near-term, sentiment-driven pullbacks as potential buying opportunities, aligning with the more bullish 7,100 price target for the second half of 2026.