Stifel's Barry Bannister Forecasts 10% Drop in Market by October

Stifel Financial's chief equity strategist, Barry Bannister, has forecasted a significant pullback for the S&P 500 over the coming months, suggesting that the current global market sell-off resembles an interest cycle slowdown. Bannister described the situation as indicative of a potential double-digit correction, aligning with Stifel's year-end target of 5,000 for the index, which reflects a 10% decline by October and a 12% drop from its July peak. As of last week, the S&P 500 closed at 5,346.56, and Bannister previously indicated that the index could fall to around 4,750 by the end of the third quarter. The strategist's outlook is influenced by recent job data and the Federal Reserve's delayed interest rate cuts, which he believes are contributing to the market's current volatility. In light of the downturn, Bannister emphasized a strategic shift towards "defensive value" sectors, such as utilities, healthcare, and consumer staples, as high-flying growth stocks continue to decline. He noted a rapid rotation from cyclical stocks to defensive investments, reflecting concerns over persistent inflation and an economic slowdown expected to last through the second half of 2024. Bannister also cautioned against a potential 50 basis-point interest rate cut by central bankers at their upcoming September meeting, labeling it a "huge mistake" that could send negative signals to the market. Currently, traders are anticipating a more modest 25 basis-point cut as the likely scenario.