Overview
- RBC Capital Markets, which raised its year-end S&P 500 target Friday, now pegs the index at 7,900, about 7.7% above Thursday's 7,335.66 close.
- RBC credited stronger profits from companies tied to artificial intelligence and heavy demand for AI infrastructure for supporting higher valuations in large-cap growth stocks.
- The firm cut its view on U.S. healthcare to market weight from overweight, citing negative earnings revisions, investor outflows, and policy uncertainty despite appealing valuations.
- RBC based the call on a valuation and earnings model that assumes roughly 3.3% inflation, steady Federal Reserve rates, and a 10-year Treasury yield near 4.5%, according to secondary coverage.
- The upgrade follows recent target hikes by J.P. Morgan and Barclays after the S&P 500 logged its biggest monthly gain since November 2020, even as risks from inflation, interest-rate timing, chip valuations, and Middle East tensions linger.