S&P 500 may climb past 7,100 if history repeats - RBC

Investing.com -- The S&P 500 could exceed RBC Capital’s 7,100 target for the second half of 2026 if historical patterns after Federal Reserve cuts hold true, analysts at the firm said.

RBC Capital highlighted that “reset cuts (those after a long pause within a cutting cycle) have a median 12-month-forward return of 13%, while non-recession cuts tend to have a median 12-month-forward return of 21%.”

The firm said this “highlights upside risk to our 7,100 2H26 S&P 500 price target.”

The note, part of RBC’s weekly “Pulse” update, examined a range of market signals.

One concern is said to be weakness in homebuilders, with the S&P 1500 Homebuilders sub-industry down more than 7% since early September.

“Weakness in Homebuilders doesn’t bode well for the recent outperformance of Small Caps,” the analysts wrote.

On earnings, RBC observed “slippage in the rate of upward EPS estimate revisions for the S&P 500,” noting that momentum is concentrated in the top 10 market-cap names while trends outside of them have deteriorated.

This divergence, the firm said, is “a negative data point for the broadening leadership thesis.”

Investor sentiment has turned more optimistic, with the American Association of Individual Investors survey showing a sharp rise in bulls last week.

RBC noted that historically, similar readings “have been followed by a +15% 12-month-forward return in the S&P 500.”

The firm also flagged improving capital expenditure trends in the second quarter, alongside a rebound in U.S. equity fund flows.

Overall, RBC concluded that while near-term macro uncertainty remains, history suggests stocks may have further room to climb if the Fed’s latest cuts are not recession-related.

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