Investing.com -- Earnings sentiment has reached a key juncture as tariff uncertainty clouds the economic outlook, RBC Capital Markets’ top U.S. strategist said in a Tuesday note.

According to the brokerage, the rate of upward earnings per share (EPS) estimate revisions for the S&P 500 has dropped to 30% on a weekly basis. The four-week average now stands at 36%, down from the low 40-50% range seen earlier in the year.

“Typically, for earnings to be derisked, we need to see this stat get to around 30% in a non-crisis backdrop, and 10-20% in a more dire scenario,” said Lori Calvasina, Head of U.S. Equity Strategy at RBC Capital Markets.

“If this indicator breaks below 30%, we think it’s reasonable to expect it to head toward that 10-20% range, which is likely to put more pressure on stock prices in the short term,” he added.

This deterioration in sentiment is coinciding with a surge in first-quarter earnings results, with nearly 300 S&P 500 companies set to report over the next two weeks.

Calvasina notes that stock prices are reacting rationally—rewarding beats and punishing misses—but that broader market pricing already reflects “a material slowdown in EPS growth, but not any outright contraction.”

In the meantime, tariff policy remains a wildcard. Calvasina said that while recession is not a foregone conclusion, transcripts from last week’s earnings calls “make us concerned that any adverse impacts from tariffs may be felt a little later in the year or even next year.”

Some companies suggested clients were already reacting with caution, pointing to delays in investment and M&A decisions.

Calvasina also highlights the deeply fragile investor sentiment. The American Association of Individual Investors survey recorded net bullishness at -31%, a level consistent with historic market lows.

The strategist points out that “the recent drawdown in the S&P 500 has been contained within ‘tier 2’ of our framework,” which corresponds to growth-scare declines of 14-20%.

No S&P 500 sector has been seeing upward revisions to both earnings and sales estimates, though Utilities stands out as the only sector with positive EPS revisions. Calvasina continues to favor Utilities given this relative earnings stability.

Overall, the strategist believes recent market moves reflect a slowdown in EPS growth, but not a full-blown contraction. He thinks stocks could find a bottom once forecasts stabilize, but if bigger cuts are still ahead, more short-term downside is likely.