RBC Lifts S&P 500 Year-End Target to 6,250 Amid Sentiment Shift, Cautious Outlook Persists
Summary
RBC Capital Markets has raised its 2025 S&P 500 year-end target to 6,250, citing strengthening investor sentiment and improving cross-asset signals. While this marks a 9% increase, RBC maintains a neutral and cautious outlook for H2 2025 due to persistent macroeconomic uncertainties like trade policy, inflation, and earnings disparities. The firm emphasizes that achieving the higher end of their forecast depends on a 'Goldilocks' economic scenario, urging investors to prioritize selectivity and risk management.
RBC Capital Markets has increased its 2025 year-end price target for the S&P 500 to 6,250, a significant 9% jump from its previous 5,730 forecast. This revision reflects strengthening investor sentiment and improving cross-asset signals, bringing RBC's outlook back in line with earlier March projections before macroeconomic concerns led to a temporary downgrade. Despite this upward revision, the firm maintains a cautious stance, anticipating continued market volatility into the second half of the year.
Key Drivers Behind the Target Upgrade
RBC's updated S&P 500 forecast is derived from a composite average of five analytical models, which consider:
- Investor sentiment and positioning
- Cross-asset relationships
- Valuation and earnings expectations
- GDP-linked historical performance
According to RBC's equity strategist Lori Calvasina, the sentiment and cross-asset models are the most constructive, implying a fair value near 6,500, which forms the upper bound of RBC's forecast range. Conversely, models based on valuation/EPS and GDP sensitivity suggest a more conservative floor of 5,700, highlighting ongoing concerns about slowing economic growth and macro uncertainty.
Volatility Ahead Despite Upward Revision
Despite the increased price target, RBC's outlook for the second half of 2025 remains neutral. Strategists noted, 'We feel neutral on the outlook for stocks in the 2nd half of 2025, and are mindful that our new price target is essentially in line with recent levels.' This caution is attributed to persistent headwinds, including:
- Uncertainty surrounding U.S. trade policy and tariffs
- The trajectory of interest rates amid sticky inflation
- Disparity between top-down models and optimistic bottom-up earnings estimates
RBC continues to project $258 in 2025 S&P 500 earnings, slightly below the consensus of $265, indicating some skepticism regarding corporate profitability in a potentially slowing growth environment.
What Investors Should Watch
The S&P 500 has already gained over 6% year-to-date, fueled by AI-related enthusiasm in tech stocks, a stable labor market, strong earnings beats, and resilient consumer spending. However, future equity valuations may depend more on macro alignment than current momentum. Investors should monitor:
- Whether U.S. GDP remains within the 1.1-2% range
- How EPS estimates evolve as Q2 earnings are released
- The ability of bullish sentiment to withstand escalating trade tensions
Final Word
RBC's revised target reflects measured optimism, balancing robust sentiment and favorable asset flows against valuation caution and macro risks. While 6,250 is now within reach, a broader breakout towards their 6,500 bull case likely hinges on a 'Goldilocks' economic outcome – an environment that is neither too hot nor too cold. For investors, selectivity and diligent risk management will be crucial as markets progress through the latter half of the year.