May 8 - RBC Capital Markets raised its year-end target for the S&P 500 to 7,900 from 7,750 on Friday, citing a combination of resilient earnings growth and continued momentum in sectors tied to artificial intelligence.
The Canadian brokerage said the new target implies about a 7.7% upside from the benchmark index's Thursday close of 7,335.66. U.S. equities have advanced to fresh record levels in recent weeks, supported by ongoing investor enthusiasm for AI-related investment and expectations of solid profit growth.
RBC noted that last month the S&P 500 recorded its largest monthly percentage gain since November 2020, underscoring the recent strength in equity markets. The firm said positive earnings revisions, largely driven by technology and other AI-linked companies, along with strong demand for AI infrastructure, have underpinned valuations and helped sustain momentum.
According to RBC, U.S. companies have displayed resilience to higher input costs and geopolitical pressures, which has kept market leadership concentrated among large-cap growth names. The strategists emphasized that the rally has continued even as the macroeconomic backdrop remains challenging - characterized by sticky inflation, uncertainty over when U.S. interest rate cuts might occur, and lingering geopolitical risks.
RBC's move to lift its S&P 500 target follows similar adjustments by other major Wall Street brokerages. The firm cited peers such as J.P. Morgan and Barclays, which raised their index targets last month, noting easing geopolitical concerns and improving earnings momentum as shared rationales.
Separately, RBC adjusted its sector stance for U.S. healthcare, downgrading the group to market weight from overweight. The bank pointed to earnings revisions, fund outflows and policy uncertainty as drivers of the downgrade, even while valuations in the sector remain attractive by some measures.
RBC's assessment frames the current market advance as one propelled by concentrated strength in technology and AI-related investment, while acknowledging macroeconomic and policy-related uncertainties that could influence performance going forward.