RBC analysts cut S&P 500 target on slowing economic growth

HSBC and Credit Suisse cut their targets on the benchmark index in May following a market selloff over fears of a prolonged war in Ukraine and record-high oil prices that are hurting global economic recovery from COVID-19. "We are continuing to bake in a slower economic growth backdrop in 2022-2023, but not a recession," RBC analyst Lori Calvasina said in a note.

Analysts at RBC Capital Markets on Monday joined other brokerages in cutting their 2022 year-end S&P 500 target, trimming it by about 3.3% to 4,700 points, due to slowing economic growth. HSBC and Credit Suisse cut their targets on the benchmark index in May following a market selloff over fears of a prolonged war in Ukraine and record-high oil prices that are hurting global economic recovery from COVID-19.

"We are continuing to bake in a slower economic growth backdrop in 2022-2023, but not a recession," RBC analyst Lori Calvasina said in a note. The brokerage previously expected the S&P 500 to end in 2022 at 4,860 points. Uncertainty around the U.S. central bank's policy move to check inflation which is running at more than three times its 2% goal, the Russia-Ukraine war, prolonged supply-chain snarls, and higher Treasury yields have rocked global stock markets.

On Friday, the S&P 500 lost 68.42 points to end at 4,108.40 points. A Reuters poll expects the index to end at 4,400 in 2022 which is up 10.7% from current levels. Several bank chiefs have recently sounded the alarm on fading consumer sentiment and demand due to record high inflation, with JPMorgan boss Jamie Dimon describing the challenges facing the U.S. economy as akin to a "hurricane" down the road.

However, RBC analysts said small-cap companies were faring better on their sentiment and valuation model, with their earnings looking better than others. "If it turns out that the U.S. avoids a recession and the U.S. equity market has bottomed, we'll look back at SmallCap's resilience in early 2022 as something telling us stocks had already priced-in the economic damage that was around the corner."