Guru anticipates an imminent collapse of a key index for the markets

Guru anticipates an imminent collapse of a key index for the markets

The Stifel team noted in a note published Sunday that they see the S&P 500 falling to around 4,750 in the second or third quarter of this year.


Barry Bannister, managing director of Stifel, predicted a strong stock fall in the coming months. The economic guru noted that “with the standardized rates and the rise in the underlying Consumer Price (PCE), in mid-2024, to just over 3%, our models indicate that we expect the Federal Reserve (Fed) rate cuts to be delayed further, causing a correction in the intermediate quarters for stocks“.

He Stifel team noted in a note published on Sunday that They see a drop in the S&P 500 to around 4,750 in the second or third quarter of this year, a correction of approximately 10% or around 500 points. And they point out that, contrary to what many economists believe, the United States experienced a slowdown some time ago that is responsible for much of the easing of price pressures from peaks.

They point out that now activity remains strong enough for inflation to remain well above expected level. “While most strategists expected a recession last year or are anxiously trying to announce the start of one next year, we have opined that the roughly 5 quarters from 1Q22 to 2Q23 were a ‘pseudo-recession’ and The Federal Reserve has already reaped all the normal disinflation post-recession that we would expect,” says Stifel.

The economy and labor demand in the US

Labor demand continues to exceed supply and Stifel predicts that manufacturing purchasing managers’ indices will show an expansion by mid-year, indicating that wages will remain resilient through early 2025. Additionally, he believes that nonfarm productivity may have peaked after of its typical period.

Stifel anticipates that the core PCE in the second half of 2024 will be above 3%. “Our opinion is that the rate cuts will be postponed,” they maintain. And he points to some technical issues that explain his caution about the S&P 500. To be what he calls a “secular bull market,” the inflation-adjusted S&P 500 must have hit new highs, and this one hasn’t yet, they say.

The mechanism for a correction is a lower price/earnings multiple of the S&P 500, which Stifel maintains is currently expensive relative to current financial conditions. Finally, Stifel warns that what he calls a “growth mania” led by artificial intelligence and technology stocks may drive the market. But there will likely be round trips by 2025, so it’s a short period.”

Source: Ambito

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