RBC Capital Markets increased its year-end forecast for the S&P 500 to 7,900 from 7,750 on Friday. They pointed to solid earnings growth and the ongoing strength in sectors tied to artificial intelligence as reasons for the upgrade. The Canadian brokerage’s new target suggests the benchmark index could rise by 7.7% from its Thursday closing price of 7,335.66.
U.S. stocks have been climbing to new record highs in recent weeks. Excitement about AI-related investments and expectations of strong profit growth continue to make investors eager. Last month, the S&P 500 recorded its biggest monthly percentage gain since November 2020.
RBC’s positive outlook follows similar moves by other major Wall Street firms like J.P. Morgan and Barclays. These firms also raised their targets for the index last month, citing reduced geopolitical risks and improving company earnings.
RBC said that positive changes in earnings forecasts, mostly driven by technology and AI-related companies, along with strong demand for AI infrastructure, have supported stock valuations. They added that U.S. companies have remained strong despite higher costs and geopolitical risks, keeping leadership concentrated in large, fast-growing stocks.
Strategists at RBC also noted that the stock market rally has continued even with tough economic conditions. These conditions include persistent inflation, uncertainty about when the U.S. will cut interest rates, and ongoing geopolitical risks.
Separately, RBC lowered its recommendation for U.S. healthcare stocks from “overweight” to “market weight.” They cited changes in earnings forecasts, money leaving healthcare funds, and policy uncertainties, despite these stocks still looking attractive.
