RBC hikes S&P 500 price target, sees US stocks running in place through year-end

RBC Capital Markets is lifting its 2025 price target for the S&P 500 to 6,250 from 5,730.

But unlike Goldman Sachs and Bank of America, whose strategists also recently upgraded their price targets on the benchmark US stock index and see the rally continuing, RBC’s view implies that stocks will effectively go nowhere through year-end. (The S&P 500 closed just above 6,280 on July 11.)

Chief US Equity Strategist Lori Calvasina noted that the five models the team uses to come up with this price target have a very wide range: from a low of 5,700 to a high of 6,500.

In a year where trade policy has been both volatile and a major driver of price action, her team no longer finds it appropriate to try to assess where the S&P 500 will go by making a judgment on whether the political environment is supportive of or detrimental to the stock market.

“In January we were baking in the annual average return when Republicans control the White House and both chambers of Congress, a gain of 11% which we thought was a good way to bake in the idea of the business-friendly backdrop for stocks,” she wrote. “Our more bearish forecasts for 2025 swapped in the S&P 500’s return in 2018 (-6.2%) as a way to approximate the challenges posed to stocks by tariffs and heightened policy uncertainty. Neither approach seems appropriate today, particularly since the S&P 500 is no longer trading in sync with the President’s polling numbers. And, so, we’ve put aside attempts to contextualize the policy backdrop for now.”

The key change underpinning RBC’s rosier stance is below (emphasis added):

“Most importantly, we’ve adjusted our way of thinking about the economic signal for the stock market. As was the case in our prior forecast, we are baking in the idea that the S&P 500 tends to fall -3.4% during years that see real GDP in the 1.1-2% range (RBC Economics and consensus are both looking for real GDP of 1.5% in 2025). But investors have been telling us that they are ready to start pricing in 2026. While it seems early to us to do so, we think it’s important to be mindful of this shift in investor focus, and so we’ve added in a second GDP test that bakes in how stocks perform in years that precede real GDP in the 1.1-2% range. Both RBC Economics and consensus anticipate another year like this in 2026, with RBC Economics’ forecast coming in at 1.3% and consensus tracking at 1.6%. In those “prior years” before 1.1-2% GDP occurs, the S&P 500 tends to gain about 8% on a full year basis, math that pegs fair value for the index in Dec 2025 at 6,352. Adding in this new way of looking at the GDP signal, and removing our policy assumption, was the biggest contributor to the change in our forecast today.”

It’s admittedly a very peculiar situation. To sum up RBC’s position, years like this year from a growth standpoint are generally poor for the S&P 500; growth this year is expected to be similar to growth next year, but since the years before slower-growth years tend to be solid for the stock market, RBC thinks the S&P 500 will hold on to its year-to-date gains.

RBC is simultaneously de-emphasizing the importance of this year by referencing how investors are looking forward to 2026 — a year when their signal would be telling them stocks should be weak because growth is relatively low! — and changing the way they think about how stocks should perform this year by not looking at this year on its own merits, but rather treating it as a year that comes before a year estimated to be a rather sluggish period for economic activity, even though growth in both years is anticipated to be broadly comparable.

Clear? Clear.