The good times for the stock market will not last long, if Stifel is correct in its assessment. Strategist Barry Bannister said in a note Sunday he expects the S & P 500 to fall 12.4% to 5,500 in the second half of the year. His comments came after the benchmark index made fresh record highs last week, closing Thursday, before the July 4th holiday, at 6,279.35. “We expect U.S. Core GDP to slow sharply in 2nd half 2025E, which has long been associated with S & P 500 corrections,” Bannister wrote. “We see slower 2H25 U.S. Core GDP as consumption slows due to weaker real employment income and falling capex.” Bannister expects year-over-year consumption growth to ease to less than 1% in the second half, leading to a steep pullback in the S & P 500. .SPX YTD mountain SPX year to date “The correction we expect occurs despite Tech being more profitable than in the ’90s Bubble … over-valuation is the issue,” he said. “The environment we expect of slowing Core GDP with sticky inflation favors a reprise, essentially a ‘market echo,’ of the ‘stagflation trade’ which is what out-performed in the 1Q 2025 correction.” Bannister’s call comes as the U.S. aims to strike trade deals with other countries. The White House over the weekend extended a deadline for other nations to reach an agreement with the U.S. to Aug. 1 from July 9. Trade tensions have grown this year as the Trump administration imposes economic protectionism, raising concern that inflation and Federal Reserve lending rates will stay high. Fed Chair Jerome Powell said last week that the central bank would have cut rates by now had it not been for Trump’s tariffs. “In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell told a central bank forum in Europe. Stifel’s Bannister said in this market climate he prefers consumer staples, utilities and health-care equipment stocks.
