Updating Our 2025 S&P 500 EPS & Valuation Models, The Market's Bad Mood

The big things you need to know:

• First, the S&P 500 EPS backdrop has stabilized, but we still anticipate further downward revisions for 2025 S&P 500 EPS. After a preliminary model refresh, we are maintaining our 2025 S&P 500 EPS forecast of $258, which is below the bottom-up consensus of $265.
• Second, we’ve updated our S&P 500 valuation model to reflect updated RBC house views on key macro variables like interest rates and inflation. It suggests that last week’s gap up in the stock market was largely deserved, but that upside from here may be limited without another major step-up improvement in broader macro expectations.
• Third, we run through our thoughts on the Moody’s US debt downgrade from a US equity market perspective.