Despite facing challenges like geopolitical tension, elevated Treasury yields, and midterm election uncertainty, the U.S. stock market has demonstrated resilience, as highlighted in RBC Wealth Management's Global Insight Mid-Year 2026 Outlook. The S&P 500 Index has rallied 8% year-to-date through June 11, with the Information Technology sector surging 17%. Corporate earnings have served as a significant stabilizing factor, and the profit outlook for 2026 and 2027 has notably brightened since the beginning of the year. The Information Technology sector, in particular, delivered a strong first quarter with 49% year-over-year profit growth, largely driven by AI capital spending.
RBC Wealth Management's base case anticipates the Federal Reserve will maintain policy rates through the remainder of 2026, though with a growing bias towards potential rate hikes. This could push the benchmark 10-year Treasury yield to test 4.8% (from 2025 highs) and potentially 5.0% (from 2023 highs). The strong U.S. economy, supported by continued consumer strength and massive AI-related capital investments, has contributed to this outlook, with inflation remaining above the Fed's target and the unemployment rate at 4.3%.
The S&P 500's strong performance, up 9.3% from the start of the year, is primarily attributed to rapid upward revisions in earnings estimates. The Bloomberg consensus for 2026 earnings is now $342, a 9% increase from $313 at the year's beginning, which would represent a 23% advance over 2025's $279 per index share. However, potential volatility from rising Treasury yields, and midterm election angst, remains a concern, given the average 21% correction around midterm election years since 1934. Credit markets, while historically rich with a scant 0.73% incremental yield over comparable Treasuries, offer few attractive opportunities for bond investors, though all-in yields for the Bloomberg US Investment Grade Corporate Bond Index are 5.3%, higher than the five-year average of 4.7%.
While the specific Bloomberg video article with the headline "RBC Says Stocks Can Weather Fed Hikes, But Not Too Many" was not directly retrievable or transcribed, the provided web search results from RBC Wealth Management's 2026 outlooks discuss similar themes, including the resilience of the U.S. stock market, the impact of corporate earnings and AI spending, and the Federal Reserve's potential actions on interest rates. The general sentiment across these RBC reports is that the market can indeed withstand certain challenges, including the prospect of Fed rate hikes, as long as underlying economic strength and corporate profitability persist.
