<\/p>\n
Wall Street\u2019s bull case on stocks just got another major vote of confidence.<\/p>\n
RBC Capital Markets bumped its 12-month target for the S&P 500 to 7,900 from 7,750, as stocks continue to notch fresh highs, according to TheFly. <\/p>\n
The firm joins a growing list of Wall Street outlets convinced that the stock market rally is being supported by strong corporate earnings.<\/p>\n
For perspective, I covered Morgan Stanley\u2019s Michael Wilson, who is echoing a similar view.<\/p>\n
Wilson also argued that strong corporate earnings remain a key driver of the ongoing stock market rally and that pullbacks will likely remain shallow.\u00a0<\/p>\n
On top of that, Goldman Sachs analysts also noted that continued earnings strength is a robust support for stocks.\u00a0<\/p>\n
RBC analysts feel that the incredible excitement over AI, Fed cuts, and the Magnificent Seven tech stocks is secondary to earnings strength at this point.<\/p>\n
The reset comes after the S&P 500 has jumped over 16% from its March 30 low, a rally that would typically invite a more defensive response.<\/p>\n
Additionally, the firm also argued that the economy is operating at two different speeds.<\/p>\n
Some businesses continue struggling with inflationary pressures, geopolitical hiccups, and broader economic uncertainty.<\/p>\n
On the flip side, others are benefiting from healthier demand linked to AI infrastructure and tech spending.<\/p>\n
RBC raised its S&P 500 outlook as AI-driven earnings continue powering Wall Street\u2019s market rally<\/p>\n
Michael Nagle/Bloomberg via Getty Images<\/p>\n
S&P 500 price-index checkpoints through the latest close2020: The S&P 500 closed at 3,756.07, up 16.3% year over year.2021: The S&P 500 closed at 4,766.18, up 26.9% year over year.2022: The S&P 500 closed at 3,839.50, down 19.4% year over year.2023: The S&P 500 closed at 4,769.83, up 24.2% year over year.2024: The S&P 500 closed at 5,881.63, up 23.3% year over year.2025: The S&P 500 closed at 6,845.50, up 16.4% year over year.As of May 8, 2026, close of 7,398.93, the S&P 500 was up 8.1% year to date and up 10.0% over six months, using the Nov. 7, 2025, close of 6,728.80.
\nSource: FRED\/S&P Dow Jones Indices.
\nRBC sees AI creating a two-speed stock market<\/p>\n
One of the most obvious criticisms of the current stock market rally has been that it\u2019s too narrow.<\/p>\n
Tech stocks, chip companies, and AI infrastructure names did most of the heavy lifting, leaving investors questioning the broader market’s strength.<\/p>\n
More Wall Street<\/p>\n
JPMorgan resets S&P 500 price target for the rest of 2026Vanguard challenges the S&P 500 as a one-stop strategyGoldman Sachs resets Broadcom stock forecast<\/p>\n
Analysts at RBC Capital Markets, though, see things a lot differently.<\/p>\n
RBC believes the market is evolving into a \u201ctwo-speed\u201d economy, where AI companies continue to deliver strong earnings growth even as other parts of corporate America struggle with geopolitical hiccups, inflationary pressures, and sluggish demand.\u00a0<\/p>\n
Consequently, RBC cut earnings expectations for the non-AI portion of the S&P 500 by 7.5%. On the flip side, AI-related earnings estimates were kept much closer to Wall Street consensus, suggesting the broader weakness could be offset by the AI giants.<\/p>\n
So far, the numbers suggest the move was supported by hard earnings data.<\/p>\n
According to LSEG data cited by Reuters, Q1 S&P 500 earnings were expected to surge roughly 29% year-over-year, led by AI-heavyweights.<\/p>\n
Moreover, according to FactSet\u2019s May 4, 2026, report, the S&P 500 blended earnings growth shot up to a tremendous\u00a0 27.1%, from 15% a week earlier, led by the Mag7 companies. \u00a0<\/p>\n
However, in a story I covered recently, Goldman Sachs said that AI-investment-related income at Google and Amazon essentially gave the Q1 earnings outlook an artificial boost.<\/p>\n
That said, RBC modeled $329 in S&P 500 EPS for early 2027 factoring in 3.3% inflation, a flat Fed rate cut scenario, and a 4.5% 10-year Treasury yield.\u00a0<\/p>\n
Other Wall Street price targets for the S&P 500Morgan Stanley: 7,800.Bank of America: 7,100.\u00a0Citigroup: 7,700.UBS Global Wealth Management: 7,500.Goldman Sachs: 7,600.JPMorgan: 7,600.Barclays: 7,650.RBC sees upside for stocks, but the market\u2019s risks cannot be ignored<\/p>\n
Though there\u2019s a lot to like about the current stock market rally, things aren\u2019t exactly risk-free.<\/p>\n
One of the big concerns is valuation.<\/p>\n
Stocks are trading at remarkably elevated multiples, with investors paying a steep premium on future earnings expansion.\u00a0<\/p>\n
According to FactSet, the S&P 500\u2019s forward 12-month P\/E ratio is at an eye-catching 21 times, comfortably above its 5-year average of 19.9 and 10-year average of 18.9.\u00a0<\/p>\n
That leaves virtually no room for missteps in the macro backdrop or the business itself.\u00a0<\/p>\n
On top of that, there\u2019s also the issue of concentration.<\/p>\n
A relatively small group of businesses linked to AI and driving the lion\u2019s share of the gains, as I mentioned earlier<\/p>\n
According to Slickcharts, the Mag7 makes up nearly 35% of the index if we count both Alphabet share classes.\u00a0<\/p>\n
Geopolitics adds a ton of uncertainty, too.<\/p>\n
For now, though, investors seem to have brushed aside Middle East tensions, but if the conflict becomes more prolonged, things could take a turn for the worse.<\/p>\n
RBC modeled those concerns, and for now, it seems that the market can keep climbing, but only if we continue to see AI-driven earnings growth delivering results.<\/p>\n
Related: Goldman Sachs dispels major misconception on Google, Amazon earnings<\/p>\n
#RBC #revamps #SampP #target #rest<\/p>\n","protected":false},"excerpt":{"rendered":"
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