Overview
RBC Capital’s U.S. equity strategists judged last week’s bout of volatility as more of a contained interruption than the start of a deeper rout. Head of U.S. Equity Strategy Lori Calvasina highlighted that the S&P 500 dipped roughly 2.6% from its recent all-time high, a move the firm views as consistent with a pattern of relatively modest pullbacks observed in recent months.
Context and historical comparisons
RBC noted that similar small-scale drawdowns have occurred over the past year and cautioned against reading the latest weakness as indicative of systemic risk. The firm said, “We’ve been here before,” and emphasized that it would be premature to assume the market is entering a stress environment akin to earlier growth scares.
Potential depth of any future pullback
While acknowledging the possibility of renewed weakness, RBC suggested that any further decline would most likely take the form of a conventional - what the firm termed - "tier 1 garden-variety pullback" in the 5-10% range rather than a deeper slump.
Risk indicators and stabilization
RBC pointed to several risk gauges that had flagged concerns in early 2026, specifically naming bitcoin and private-market proxies. The firm observed that these indicators began to stabilize late in the week, reducing one source of near-term market stress.
Model-based outlook and target
The firm’s internal models continue to favor gains for equities over the next 12 months. RBC reiterated its 7,750 target for the S&P 500, noting that valuation and earnings-based techniques underpin that view. Their outlook assumes modest Federal Reserve cuts, stable long-term yields, and an S&P 500 earnings-per-share expansion of 13% in 2026.
Earnings and valuations
RBC highlighted that fourth-quarter 2025 earnings trends showed some improvement, which helped power a rebound in prices on the Friday following the pullback. The firm also flagged that bottom-up 2026 EPS estimates have moved back toward $314, saying that this revision feeds directly into their valuation framework and bolsters confidence in the stated price target.
Investor positioning and sentiment
According to RBC, sentiment measures are not at euphoric levels. Both retail and institutional positioning suggest there is room for additional upside, rather than indicating an overextended market. Overall, their models and the combination of valuation and earnings trends are the basis for continued optimism on equities over the coming year.
Note: This report reflects RBC Capital’s assessments and model outputs as described above. It does not assume wider systemic stress and frames the recent market move as consistent with prior modest drawdowns.