RBC's Markets in Motion

The big thing you need to know:

Our overall impression from 2Q25 reporting season is that companies are managing through tariffs fairly well so far, but it’s still too early to assume tariffs won’t generate inflation pressures. We run through four takeaways on what we learned in 2Q25 reporting season last week regarding the overall tone, the state of demand, the consumer, and the timing of tariff impacts.

The big things you need to know:

• First, we run through our first impressions from week 1 of 2Q25 reporting season in terms of both the stats and company commentary. Out of the gate, our impression is that it’s been fine but not fabulous.
• Second, we review what else jumps out to us on our high frequency indicators which includes the underperformance of quality factors, average levels of bullishness on the weekly AAII retail investor survey, and subdued flows to US equity funds.

The big things you need to know: First, we are lifting our year-end 2025 S&P 500 price target to 6,250, essentially taking our price target back to where it was in mid-March. Second, there is no change to our 2025 S&P 500 EPS forecast of $258, which is slightly below consensus. We also review what we’ve learned from the early reporters, which makes us think it’s too early to stop worrying about tariff impacts. Third, we’re adding the momentum trade and earnings sentiment for mega cap growth to the list of things worrying us about the stock market near-term.

The big things you need to know:

• First, we review the bull thesis that we heard in client meetings last week, and our thoughts on where it could go wrong.
• Second, we review how the rally in equities has been looking a bit overdone on our valuation and EPS modeling, and how we’re also starting to run out of room on one of our sentiment studies.
• Third, conditions are rather mixed for US equities at the moment. We walk through things that look good, and things that look not so good. In the latter camp, one thing that stands out as particularly important to us is the failure of c-suite sentiment in widely followed surveys to inflect positively, as has been the case with consumer, small business, and investor sentiment surveys.

Four big things you need to know: First, globally our analysts are constructive on performance over the next 6-12 months. Second, driven in part by our survey results, we are making six changes to our US sector calls – we dig in a little deeper to the upgrades of Materials, Consumer Staples, and REITs here. Third, while we don’t make recommendations on non-US sectors, we do highlight how Financials is a favorite across the globe among our analysts. Fourth, improving 2026 consensus GDP forecasts are a positive outlier for the US compared to our other coverage regions, which we think has been helping boost US performance.

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Listen to this episode for a recap of our biggest call of the year...

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The big things you need to know:

• First, solid earnings stats are in place as US equity investors wait for the onset of 2Q25 reporting season.
• Second, the latest Business Roundtable survey highlighted weaker corporate vibes relative to March, echoing the tone in last week’s earnings call transcripts to some degree for Russell 3000 companies, where cost containment discussions jumped out to us.
• Third, we recap our views on how we’re thinking about the recent developments in the Middle East from a US equity market perspective.

The big things you need to know:

• First, the conflict in the Middle East comes at a complicated time for the US equity market, as our sentiment and seasonality work has been suggesting stock prices could keep moving up, while our valuation/earnings and GDP analysis has been suggesting that the stock market has gotten ahead of itself. We highlight the three potential challenges we see for the US equity market from this conflict, which we are monitoring closely.
• Second, we revisit our four tiers of fear framework, which helps us map out potential downside in US equities from the conflict, particularly if conditions escalate and broaden out.
• Third, Energy and Materials seem most likely to outperform if the conflict results in a sustained oil price spike, while Consumer Discretionary and Communication Services seem most likely to underperform. We’re also keeping an eye on Utilities and REITs as potential, tactical outperformers.

The big things you need to know:

• First, consensus expectations for 2026 are inching up for S&P 500 EPS in a broad based way, a positive data point for the stock market but a slight one.
• Second, net bulls on the AAII survey have moved up sharply, and formally entered a less robust forward return environment last week.
• Third, the seasonal playbook reminds us that in recent years June and July have tended to be strong for the S&P 500 but that the transition into fall has been tricky with declines often seen in the August – October time frame.

RBC’s Markets in Motion is the weekly podcast from Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, highlighting her latest views on the US equity market. In this special edition, Lori is joined by her colleagues Amy Wu Silverman (RBC Derivatives Strategist) and Ben Fisher (RBC Midwest Sales, who works closely with the firm's macro strategists). They discuss the current, messy state of the US equity market and the pickles investors are finding themselves in. Ben moderates the discussion, which was recorded live at the RBC EPIC Conference in NYC on June 4th, 2025.

The four big topics covered:

• First, where Lori and Amy see US equity markets and volatility headed. Lori describes herself as neutral and reviews her new YE 2025 S&P 500 target of 5,730, which is driven by her valuation and earnings work and a macro backdrop that looks a bit better than it did in early April, but not as strong as it was in January. Amy highlights how both the right and left tails have gotten fatter recently, and runs through what she sees as the potential catalysts for a pick-up in volatility.
• Second, Amy and Lori's latest thoughts on investor sentiment and positioning. Amy highlights differences in recent behavior from retail investors (who were buying the dip) and institutional investors (who were more cautious and engaged in derisking and degrossing). She points out that hedging on the institutional side has not been short term in nature, due to uncertainty about when the hard data will deteriorate. Meanwhile, Lori notes that many of the investors she speaks with are in a holding pattern, waiting to see what happens next, and walks through a number of key questions that investors will be looking for the answers to in the next reporting season. She also highlights the messiness of recent investor sentiment and positioning data, which fell but never completely collapsed for institutional investors and has been rebounding rapidly after collapsing for retail investors.
• Third, Lori and Amy's thoughts on some of the biggest positioning trades in equities of late. Lori highlights why she sees the tug of war between mega cap Growth and Value continuing, the intersection of the mega cap Growth trade and US exceptionalism, and how tariffs opened a door to curiosity about regions outside the US that will be difficult to close. Meanwhile, Amy highlights increased activity regarding trades on China and Emerging Markets and how she believes that her clients are the most Euro curious she's seen in quite some time.
• Fourth, thoughts regarding the impact of the bond market on US equities. Lori runs through why 5% on 10-year yields would be a stumbling block for US equity market performance, while Amy highlights the potential for the inverse correlation between bonds and equities to break down as a key risk to monitor.