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RBC EYES 7,750 FOR S&P 500 IN 12 MONTHS, SEES CONTRARIAN BUY SIGNALS

RBC Capital Market's head of U.S. equity strategy, Lori Calvasina has set a 12-month price target for the S&P 500 .SPX index of 7,750, which is about 13.5% above where the index is now.

"Investor sentiment may have more room to fall in the near term, but is already at levels sending a contrarian buy signal over the longer term", Calvasina said.

Expectations for solid EPS growth plus some modest valuation tailwinds from lower rates can offset the valuation headwinds from uncomfortable inflation in the year ahead, she added.

The strategist writes that the index could reach 7,200 at the low end to nearly 8,000 at the high end.

But she sees renewed interest in geographical diversification as an ongoing headwind for the U.S. equity market as the new year gets underway.

Calvasina writes that RBC is betting on value and smaller companies, but notes that unless those companies start showing stronger earnings growth than big tech/growth names, the trend won't last.

(Joel Jose)

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