RBC eyes S&P 500 at 7,750 by year-end as AI-fueled rally meets Eurozone inflation uptick
Equities stayed buoyant after RBC projected the S&P 500 could reach 7,750 by year-end, even as a growth-versus-value tug-of-war persists and Eurozone inflation ticked up. Traders balanced AI-driven upside with valuation risks, steady ECB policy, and a new European stablecoin plan that could reshape digital payments and euro liquidity by 2026.
Key Points
- RBC sees the S&P 500 at 7,750 by year-end, implying roughly a 13% gain, while cautioning on stretched AI valuations.
- Eurozone headline inflation edged up to 2.2% with core steady at 2.4%; the ECB held rates, signaling a steady-hand approach.
- A consortium of 10 European banks plans a euro‑pegged stablecoin launch in H2 2026, aiming to challenge U.S.-centric digital rails.
- Bayer jumped about 9% after U.S. government backing in a Roundup case; a $1.25 million verdict is under review.
- Cyber Monday travel promotions—up to 75% off—buoyed leisure names, though margin impacts remain a watchpoint.
- Analysts say robust U.S. AI spending may offset tariff headwinds, keeping global growth near 3.2%.
Wall Street outlook: RBC’s bold call meets valuation angst
RBC’s upgraded target underscores confidence that mega-cap earnings and AI investment can extend the cycle. Still, the bank flagged persistent valuation anxiety as growth leadership narrows and cash-rich investors weigh chasing momentum versus rebalancing into cyclicals and value. Options markets reflect a bid for downside hedges, while dip-buying remains well supported—conditions that tend to keep realized volatility rangebound unless macro surprises reprice rates.
Eurozone inflation and ECB: EUR steady as policy stays on hold
Eurozone headline CPI nudged higher to 2.2% with core stuck at 2.4%, giving the ECB room to stay patient. The central bank kept rates unchanged, reiterating a data-dependent stance amid fragile global demand and ongoing geopolitical risks. In FX, the euro held broadly steady as traders parsed a modest rise in front-end European yields against a still-resilient dollar backdrop. Rate differentials remain the swing factor for EUR/USD, with any upside likely requiring either softer U.S. inflation or clearer Eurozone disinflation progress.
Europe’s banks plan a euro‑stablecoin by 2026
Ten leading European banks are developing a euro‑pegged stablecoin slated for the second half of 2026. The initiative aims to diversify global payment rails away from U.S.-dominated systems and expand euro-denominated liquidity in digital finance. For FX markets, a credible, regulated stablecoin could incrementally support euro usage in cross-border commerce and DeFi, though adoption, interoperability, and regulatory clarity under MiCA will be decisive.
Stock movers: Bayer surges on Roundup litigation support
Bayer rallied after U.S. government support in a Roundup case, with a $1.25 million verdict now under review. The relief rally lifted German healthcare peers and supported broader European risk tone. While litigation overhangs remain, today’s move reflects reduced tail-risk pricing and a recalibration of legal liabilities.
Consumer pulse: Travel deals put leisure in focus
Cyber Monday deals—some as high as 75% off—drove attention to airlines, hotels, and online booking platforms. The trade-off is classic: heavier discounting can dilute margins but may spur volumes, underpinning Q4 revenue mix. For FX, stronger travel activity tends to favor tourism-heavy economies and can modestly support commodity and cyclical currencies if broader risk sentiment stays constructive.
Macro pulse: AI capex offsets tariff drag in growth math
Economists say U.S. AI investment is cushioning the impact of tariff-related frictions, anchoring global growth near 3.2%. That mix—solid capex, mixed trade—keeps the policy path data-driven. In rates, the long end remains sensitive to supply and term premium dynamics; for FX, stable growth with sticky services inflation argues for two-way dollar trading rather than a one-way trend.
Market implications for FX and rates
– EUR: Sideways near-term as ECB waits for clearer disinflation. Upside requires either softer U.S. prints or firmer Eurozone activity data.
– USD: Range-bound with episodic spikes on yield moves; watch services inflation and labor data.
– Equities: Growth leadership persists, but a broadening to cyclicals would signal confidence in a durable soft-landing.
– Volatility: Still suppressed, though positioning is extended—macro surprises could amplify moves in year-end liquidity.
FAQ
How could RBC’s 7,750 S&P 500 target affect currencies?
A higher U.S. equity path bolsters risk appetite, often lifting cyclical and high-beta FX. However, if gains are concentrated in mega-cap tech, the dollar may stay resilient via safe-haven and yield support, keeping EUR/USD directionally balanced.
What does the latest Eurozone inflation mean for the ECB and the euro?
With headline at 2.2% and core at 2.4%, the ECB can remain on hold. The euro reaction was muted as markets already priced a steady stance. Sustained disinflation or firmer growth will be key to breaking EUR/USD out of its range.
Will a euro‑pegged stablecoin change FX markets?
Not immediately. If widely adopted, a regulated euro stablecoin could enhance euro liquidity in digital payments and DeFi, marginally supporting the euro’s role in global transactions. Implementation, regulation, and bank integration are prerequisites.
Why did Bayer shares rally?
Investors welcomed U.S. government support in an ongoing Roundup case, with a $1.25 million verdict under review. The move lowered perceived legal tail risk, supporting the stock and sentiment in European healthcare.
Do Cyber Monday travel discounts help travel stocks?
They can, by driving bookings and occupancy, though heavier discounting may pressure margins. Markets typically reward signs of demand strength near term, especially when combined with disciplined capacity management.
Is AI investment really offsetting tariff headwinds?
Current forecasts suggest robust U.S. AI capex is supporting productivity and earnings, helping keep global growth near 3.2% despite trade frictions. For FX, that mix implies two-way dollar trading as inflation and yields guide the next leg.
This report was prepared for readers of BPayNews.
