RBC Capital Markets has raised concerns about a potential deeper pullback in the S&P 500, cautioning that the index could drop to the 4,900-5,300 range. While the investment bank still maintains its year-end target of 6,600, it acknowledges that risks have increased due to shifting economic conditions and investor sentiment.
Growing Concerns Over Market Weakness
Lori Calvasina, head of U.S. equity strategy research at RBC, pointed out that downside risks are mounting. She noted that a significant market drawdown—similar to the largest corrections seen in the years between the Global Financial Crisis (GFC) and the COVID-19 pandemic—could result in a 14-20% decline from recent highs.
“The risk of a deeper, growth scare drawdown has risen. This could push the S&P 500 down into the 4,900-5,300 range,” Calvasina explained in a recent note. She also suggested that RBC may need to shift from its base case outlook to a more bearish scenario if conditions deteriorate further.
Economic and Policy Uncertainty Adding Pressure
The recent volatility in the stock market comes as investors navigate an uncertain economic landscape. Policy decisions from Washington, including discussions around tariffs, spending reductions, and regulatory changes, are adding to the headwinds.
Investor sentiment has also weakened, with concerns emerging about the labor market. Calvasina noted that surveys and economic data are beginning to show signs of strain, which could weigh on corporate and consumer confidence.
What It Will Take for Stocks to Stabilize
RBC believes that for the market to find a bottom, there must be clear signs of economic resilience. Calvasina emphasized that a rebound in hard economic data or positive shifts in investor sentiment, valuation trends, and earnings revisions would be key indicators.
While the bank has not altered its 6,600 year-end price target, it acknowledges that a temporary 10% pullback to around 5,500 is possible. However, if economic challenges deepen, RBC may adjust its outlook to its more cautious bear-case target of 5,775.
Federal Reserve and Market Stabilization
Investors are closely watching Federal Reserve policy, with hopes that interest rate cuts could provide support to the market. However, RBC warns that inflation pressures and labor market uncertainties could complicate the Fed’s decisions.
At this stage, the firm describes itself as being in a “discovery process,” expecting continued volatility until there is more clarity on economic fundamentals and market trends.

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