RBC Capital Markets Predicts S&P 500 Pullback

RBC Capital Markets predicts a 5% to 10% garden variety pullback in the S&P 500 over the coming weeks or months. Strategists Lori Calvasina, Rachel Sidari, and Simon Simoski identify four tactical risks driving this potential correction: the war in Iran, potential downward revisions to GDP and earnings growth forecasts, volatility surrounding the U.S. midterm elections, and a hawkish pivot from the Federal Reserve coinciding with higher bond yields.

Despite these short-term risks, the firm maintains a 12-month target for the S&P 500 at 8150. Analysis of market drawdowns since 1956 suggests that while a correction is brewing, recent resilience in corporate profits and labor market indicators may mitigate the severity of the decline.