The big things you need to know: First, our 12-month S&P 500 price target remains 7,750, and we assume the index has put in a fragile, foggy bottom. Second, we run through our thoughts on what we’re hoping to learn more about in the upcoming reporting season. Third, other things that jump out include how 2026 EPS growth forecasts for most sectors have been frozen since the start of the war, and the decline in consumer expectations for stock market performance over the next 12 months.

If you’d like to hear more, here’s another five minutes.

Starting with Takeaway #1: How We’re Thinking About the Outlook for the US Equity Market

Uncertainty in forecasting is unusually high and is likely to remain so for an extended period of time, but with a messy ceasefire in place, we thought it was a good time to reflect on how we’re thinking about the outlook for US equities from here, focusing more on numbers than narrative.

• Our 12-month S&P 500 price target remains 7,750, a gain of 13.6% from the April 9th close. 7,750 is in line with the median of the outputs of our investor sentiment, valuation/EPS, earnings yield gap, GDP, and Fed models, with three of those models clustered around that number.

o Our models range from roughly 7,200 at the low end – that’s from our GDP test which reflects the typical return of 5.7% in a 1.1–2% real GDP environment…

o to more than 7,800 at the high end – that’s from our AAII sentiment test which generates a +15% forward return signal based on the deep levels of bearishness that have been in place recently.

o Our valuation/EPS model is also worth calling out –

 This model forecasts a P/E based on inflation and interest rate assumptions, and projects a fair value for the S&P 500 by combining that with an EPS assumption and signals fair value at the end of 1Q27 of 7,759.

 We removed consensus macro assumptions (which have been frozen) and consensus EPS assumptions (which have moved up) and put in more conservative metrics. We haircut consensus EPS for the next four quarters by 5%. On the P/E, we baked in headline inflation of 3.3% in 1Q27, no Fed cuts, and 10-year yields that move up to 4.5%.

• The story the math tells is that the S&P 500 can stay on a path to 7,750 over the course of the next year, supported by a recovery in investor sentiment from deeply bearish levels, and a solid earnings growth and economic backdrop that don’t incur too much damage as a whole from recent disruption to energy markets and the Middle East.

• On positioning, we have a slight bias in favor of Large Cap Growth over Large Cap Value. We think US equity market performance will reflect trends in earnings over the next 12 months, and the earnings story is simply stronger for Growth than Value at the moment. Bottom-up consensus EPS growth forecasts remain stronger for Mag 7 than the rest of the market and 2027 Mag 7 EPS growth forecasts are showing acceleration vs. 2026, something we’re not seeing for the rest of the market. We also expect energy market and middle east disruption to weigh more heavily on the non-Mag 7 areas.

• While we don’t have a strong view on US equities relative to non-US equities at the moment, we would continue to give a slight edge to the US… which is also supportive of Growth over Value within the US.

Moving on to Takeaway #2: What We’re Listening for in the Upcoming Reporting Season

Some of the specific Iran related topics we’ll be listening for include: (1) color on how much inventory companies have in stock for goods impacted by the conflict (our recent transcript reading suggests some have 3-6 months) and any color on hedging, (2) assumptions on cost impacts from energy prices and other inputs, (3) how companies are managing any supply chain challenges, (4) how corporate confidence and decision-making have been impacted by the event, (5) how long the war and disruption to energy markets can last before it will start to impact corporate America, and (6) whether companies are seeing any kind of material change in consumer behavior, and, if so, within what cohorts, given elevated gas prices and the weak consumer confidence/sentiment readings we’ve seen in recent survey data. We do worry based on what we’ve read over the past month that companies simply will not have enough information to give investors about the war’s impacts just yet.

Beyond Iran, we’ll be on the lookout for color on tariff impacts and assumptions, and insights into how AI tools may or may not be impacting company financials and specific use cases.

Wrapping up with Takeaway #3: What Else Jumps Out

• Second, the most interesting to us in the two consumer confidence/sentiment releases that came out over the past few weeks was the Conference Board update on expectations for stock prices over the next 12 months. This stat has started to fall from extremely elevated levels but remains well above historical norms. This could be signaling that retail investors will be less aggressive about buying the dip going forward.

That’s all for now. Thanks for listening. And be sure to reach out to RBC with any questions.