STOCKS | Royal Bank of Canada: U.S. Stock Selloff May Be Nearing an End, but Risks Remain

Royal Bank of Canada strategist Lori Calvasina said the U.S. stock market may be nearing a short-term bottom, but declines could continue if earnings and economic growth face more severe shocks. According to Sina Finance, sentiment measures, including the bullish share in the American Association of Individual Investors survey, have fallen to levels associated with a moderate selloff, with investors more stunned than panicked. The relative valuation appeal of U.S. stocks has improved, and the gap between their forward price-to-earnings ratio and that of other developed markets has returned to around its post-pandemic low, potentially allowing U.S. stocks to regain market leadership. The S&P 500’s valuation contraction has exceeded typical levels in most major selloffs, and its decline has exceeded many investors’ perceptions; however, the Russell 2000 has not reached the deeply oversold territory associated with past market bottoms.