UPDATE 1-RBC lifts S&P 500 year-end target to 7,900 on AI optimism

Strategists at RBC also said the rally has continued despite a challenging macro backdrop marked by sticky inflation, ⁠uncertainty over the timing of U.S. rate cuts, and lingering geopolitical risks. Separately, among ⁠sectors, RBC ⁠downgraded U.S. healthcare stocks to "market weight" from "overweight" due to earnings revisions, fund outflows and policy uncertainty despite still-attractive valuations.

​RBC Capital Markets raised its ​year-end target for the S&P ‌500 to ​7,900 from 7,750 on Friday, citing resilient earnings growth and continued strength in artificial intelligence-linked ‌sectors.

The Canadian brokerage's new target implies a 7.7% upside from the benchmark index's Thursday close of 7,335.66. U.S. equities have rallied to hit record highs in ‌recent weeks as enthusiasm around AI-related investment and expectations of solid ‌profit growth continue to support investor appetite.

The S&P 500 posted its biggest monthly percentage gain since November 2020 last month. RBC's bullish stance follows similar moves by major Wall Street ⁠brokerages such ​as J.P. Morgan ⁠and Barclays, which raised their targets for the index last month, citing easing geopolitical ⁠risks and improving earnings momentum.

RBC said positive earnings revisions, driven by technology ​and AI-linked firms, alongside strong demand for AI infrastructure have supported valuations. It ⁠added that U.S. companies have remained resilient to higher costs and geopolitical risks, keeping ⁠leadership ​concentrated in large-cap growth stocks. Strategists at RBC also said the rally has continued despite a challenging macro backdrop marked by sticky inflation, ⁠uncertainty over the timing of U.S. rate cuts, and lingering geopolitical risks.

Separately, among ⁠sectors, RBC ⁠downgraded U.S. healthcare stocks to "market weight" from "overweight" due to earnings revisions, fund outflows and policy uncertainty despite still-attractive valuations.