US stock markets have seen substantial volatility in recent weeks, but analysts continue to predict further declines in the months that lie ahead.
Lori Calvasina is the Head of US Equity Strategy at RBC Capital Markets. She believes that this ongoing weakness will eventually turn into a correction of 10%.
At the time of writing, S&P 500 is about 4.0% lower than its record high.
Does it remain a bullish market?
Lori Calvasina believes that there will be a major pullback on the short term, but is still confident of the long-term trend.
On Tuesday, she remained steadfast in her target for S&P500 year-end of 6,600. This translates into a roughly 12% increase from the current level.
We were clear when we told the 6600 people that a 10% to 5% decline was expected to occur early this year.
In an interview today with CNBC, she stated that “it looks as if we are heading in the right direction”.
RBC’s strategist acknowledged that, if benchmark indexes continue to fall beyond 10% over the next few weeks, her target for the year could be at risk.
Why is the S&P500 down in 2025?
The US stock market has declined this year for several reasons. One of the reasons is that “The Magnificent 7”, which almost solely contributed to returns in 2024, are now losing their luster.
Apple, Nvidia and other companies have all seen their stock prices fall by over 10% from previous records.
The 10-year Treasury Yield is also on the rise and reached a new 14-month peak Monday.
The S&P 500, as it approaches the 5.0% mark that is so closely monitored, will need to compete even harder for the capital of investors.
Lori Calvasina’s warning about a possible 10% correction to the benchmark index is not unique.
Mark Hackett, of Nationwide, echoed this view in a note he wrote recently. “This is textbook example of the market overreacting and correcting itself.”
Even he sees this ongoing weakness as positive and healthy for the stability of US markets on the long term.
The financials and utilities sectors are well-positioned
RBC’s Lori Calvasina, a strategist at the bank, says that the utilities sector is a possible defense safe haven despite the decline in recent months.
Lori “overweights” utility stocks because they are less susceptible to fluctuation in the US Dollar.
She’s also convinced that this sector will continue to thrive even if Donald Trump, the new US president, follows through on his pledge of increasing tariffs on imported goods.
RBC Capital is particularly fond of AES Corporation, Brookfield Renewable Partners and the role they play in powering AI data centres.
Although the market is still volatile, this investment company remains bullish about financials.
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