If you’d like to hear more, here’s another five minutes.
Starting with Takeaway #1: Reiterating Our 12-Month S&P 500 Price Target of 7,750
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- First, after running through this exercise, 7,750 is approximately the median output from our five models which focus on investor sentiment, valuation and EPS, the appeal of stocks relative to bonds, the economic backdrop, and the monetary policy backdrop.
- Second, the range of outputs tightened from roughly 7,200–8,000 in the early-December edition of our analysis to roughly 7,500–8,000 in our early-January update.
- Third, the signals shifted for two of our models in opposite directions.
% range since:
- The signal for our sentiment model deteriorated. At the time of our early-December analysis, AAII net bulls had fallen to more than 1 standard deviation below the long-term average, into a range typically followed by a 15% 12-month-forward return in the S&P 500. Since that time, net bulls have rebounded to levels between average and 1 standard deviation above the average, taking this indicator into a range that has been accompanied by a 9% 12-month-forward return in the S&P 500 over time.
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Moving on to Takeaway #2: What Else Jumps Out on Our Latest Updates
Value outperformed Growth as:
- Second, we will be keeping a close eye on the rate of upward EPS estimate revisions for the S&P 500 in the upcoming reporting season. Whether we’re looking at the S&P 500, the top 10 market cap names in the S&P 500, or the rest of the index, the rate of upward EPS estimate revisions – our favorite gauge of earnings sentiment – remains in positive territory but has not yet been able to recapture its late-summer high. We think the deceleration in earnings sentiment that occurred in recent months contributed to choppy conditions in stocks in November.
- Third, sentiment ended:
- Fourth, CFOs are feeling a little bit better as 2026 begins. Over the holidays, the soft data we were most curious about was the quarterly Duke CFO survey. Optimism on both one’s own company and the broader economy remained subdued but did pick up. Tariff concerns fell, but tariffs remained the top item on the list of worries. The survey also revealed some optimism about productivity benefits from AI in the year ahead, but few seemed to be anticipating major impacts to costs and employment.
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
