RBC says last week’s pullback in stocks likely short lived

Investing.com -- Last week’s volatility in U.S. equities is unlikely to mark the start of a deeper downturn, according to RBC Capital, which argues the latest weakness “has played out for now.”

Head of U.S. Equity Strategy Lori Calvasina wrote that while the S&P 500 briefly fell 2.6% from its recent all-time high, the move was in line with a series of similarly small drawdowns seen over the past several months.

“We’ve been here before,” RBC Capital said, noting comparable dips last year.

Calvasina added that even if markets do weaken again, it would likely resemble a “tier 1 garden-variety pullback in the 5–10% range,” stressing that it is “premature to assume” a systemic risk backdrop similar to past growth scares.

The analyst also noted that risk indicators that flashed concerns in early 2026, such as bitcoin and private-market proxies, began to stabilize late last week.

RBC Capital said its models “still argue for solid gains in the stock market over the next 12 months,” reiterating a 7,750 target for the S&P 500.

The firm noted that sentiment gauges remain far from euphoric, with both retail and institutional positioning suggesting room for upside. Valuation and earnings-based models also “point to strong gains,” supported by expectations for modest Fed cuts, stable long-term yields, and 13% S&P 500 EPS growth in 2026.

The firm highlighted that 4Q25 earnings trends “did firm up a bit,” helping support Friday’s rebound.

And with bottom-up 2026 EPS estimates rising back to $314, RBC Capital stated that “this stat feeds directly into our valuation model for our price target and its resilience contributes to our ongoing optimism on stocks over the next 12 months.”

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