Key Points
- RBC Capital Markets warns that a typical 5-10% market pullback could send the S&P 500 below 6,000.
- Uncertain corporate earnings outlooks are a major source of concern for investors.
- Companies are worried about the impact of tariffs, consumer behavior, and future demand.
- The market feels “frothy” with high valuations, and upcoming months are historically weak for stocks.
Get ready for a potential dip in the stock market. According to RBC Capital Markets, the next pullback could easily push the S&P 500 below the 6,000 mark, flagging increased risks for investors after a strong run of gains.
In a new report, RBC strategist Lori Calvasina warned that even a “garden-variety pullback” of 5% to 10% could send the benchmark index down into the 5,751 to 6,075 range. This warning comes after the market recently hit a new high, which effectively resets the potential downside for investors.
While the economy has been a major focus, RBC points to corporate earnings as another source of worry. Even though many companies reported solid profits for the last quarter, their outlooks for the future were filled with uncertainty.
Executives frequently mentioned concerns about tariffs, unpredictable consumer spending, and a lack of clear visibility into future demand. “We think earnings season is also a reason for equity investors to feel unsettled,” Calvasina wrote.
This growing sense of caution follows a recent 2.4% weekly drop in the S&P 500. On top of that, historical trends might work against the market in the short term. RBC notes that September and October have often been weak months for stocks.
Calvasina also mentioned that the market has felt “a bit frothy” lately, pointing to high valuations and weak investment flows into stock funds, even as fear indexes like the VIX have started to rise from their lows.
