RBC slashed its S & P 500 year-end target, citing a slowing economy. The Wall Street bank found some good news in small-cap stocks which have become more appealing. The bank trimmed its S & P 500 2022 price target to 4,700 from 4,860 previously, according to a Monday note from Lori Calvasina, RBC’s head of U.S. equity strategy. The forecast’s new close is now 4,108.54, a gain of 14%. Calvasina explained that the economic growth is slowing down in 2022-2023. However, it’s not in recession. “We are still seeing remarkable stability with bottom-up consensus 2022-2023 and 2023 EPS predictions.” “Signs have begun to emerge that indicate the stock market might have reached its bottom,” said the strategist. The S & P 500 briefly dipped into bear market territory last month as the Federal Reserve’s aggressive tightening action stoked recession fears. Calvasina stated that defensive sector valuations were about as costly as they get in relation to Secular Growth and Cyclical sectors. “The declines in the S & P 500 Consumer Discretionary and Communication Services sectors at the May 19th low in the broader market came close to the average decline in these sectors during the last four recession related drawdowns in the US equity market.” Small caps have a brighter future RBC raised small caps from underweight to neutral. This was due to improved risk/reward and better earnings. “Small Cap looks intriguing or better on our positioning/sentiment, valuation, and earnings work,” Calvasina said. Calvasina said that Small Cap is still facing fundamental headwinds and we are not ready to return to overweight. … It’s also worth noting that Small Caps are starting to look a little better than Large Cap on the earnings front.” The Russell 2000 benchmark is up more than 1% this month, outperforming the S & P 500 and the Nasdaq Composite. The year-to-date small-cap index has fallen by more than 15%.