RBC Capital Markets has reduced its year-end target for the S&P 500 (SP500) to 5,500, citing heightened concerns around U.S. economic growth following President Donald Trump's announcement of sweeping global tariffs. The revised forecast represents an 11% downgrade from its earlier 6,200 projection.
“This shift effectively turns our former bear case into our new base case,” said Lori Calvasina, head of U.S. equity strategy at RBC, in a note published Friday.
She outlined four tiers of market stress, stating that the index exited Tier 1 following the tariff announcement on Wednesday, after closing Thursday more than 12% below its February peak. In a Tier 2 scenario, the S&P 500 could decline as much as 20% from highs, landing between 4,900 and 5,300.
As of Friday afternoon, the S&P 500 was down roughly 16% from its all-time closing high of 6,144.15 set in mid-February. RBC's updated 5,500 target implies about 7% upside from Friday's intraday level of 5,150.
RBC also lowered its U.S. GDP growth forecast for 2025 to a range of 0.1%–1%, compared to its previous estimate of 1.1%–1.2%. Calvasina compared the current downturn to previous “growth scare” periods in 2010, 2011, 2015–2016, and 2018 — each driven by varying macro shocks, from sovereign debt crises to trade tensions.
The SPDR® S&P 500® ETF Trust (SPY, Financial), which tracks the S&P 500 index, reflects this market turbulence. Over the past month, SPY has declined 7.79%, underperforming the median return for all ETFs of –3.55%. Its six-month return stands at –4.88%, while its 12-month return remains positive at 4.64%, slightly above the ETF median of 4.08%.
RBC's downgrade marks its second S&P 500 revision this year and highlights growing investor unease over the potential economic fallout from escalating trade measures.
