US stocks have already seen significant turbulence in recent weeks but strategists continue to warn of further downside in the months ahead.
The ongoing weakness could turn into a 10% correction moving forward, according to Lori Calvasina, the head of US equity strategy at RBC Capital Markets.
The benchmark S&P 500 index is down about 4.0% versus its all-time high at writing.
Is it still a bull market?
Lori Calvasina sees a significant pullback in the near term but remains convinced that the market will rip higher again over the longer term.
She stuck to her year-end target of 6,600 for the S&P 500 on Tuesday which translates to bout a 12% upside from current levels.
“We were very clear with the 6,600 that we expected a 5% to 10% pullback to materialize early in the year.
And the last few days, it looks like that’s right where we’re headed,” she said in an interview with CNBC today.
The RBC strategist, however, agreed that her year-end target may be threatened if the benchmark index ends up sliding beyond 10% in the coming weeks.
Why has the S&P 500 slipped in 2025?
US stocks have slipped this year due to several factors. For one, the “Magnificent 7” stocks that almost single-handedly drove returns in 2024 are losing steam.
Notably, the likes of Apple and Nvidia are down over 10% each from their record levels.
Plus, the 10-year Treasury Yield has been pushing up and touched a 14-month high on Monday.
As it advances further to the closely watched 5.0% level, the S&P 500 will have to fight even more for investors’ capital.
Note that Lori Calvasina is not alone in warning of a potential 10% correction in the benchmark index.
Mark Hackett of Nationwide echoed a similar view in a recent note, saying “This is a textbook case of the market getting ahead of itself and self-correcting.”
He even sees the ongoing weakness as healthy and constructive for the long-term stability of the US markets.
Utilities and financials remain well-positioned
Amidst the current decline that may only worsen in the months ahead, RBC strategist Lori Calvasina dubs the utility sector as a potential defense safe harbor.
Lori is “overweight” utility stocks as they tend to be relatively less sensitive to fluctuations in the US dollar.
Additionally, she’s convinced this sector will remain resilient even if the incoming US President, Donald Trump, makes good on his promise of raising tariffs on foreign goods.
Within the utility space, RBC Capital particularly likes AES Corporation and Brookfield Renewable Partners as both of them play a central role in powering the AI data centers.
The investment firm is bullish on financials amidst the ongoing market turbulence at writing as well.
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