Stocks have been on a rollercoaster ride lately, with last week’s sell-off followed by a rebound this week. However, according to Stifel’s chief strategist Barry Bannister, investors should still exercise caution when considering jumping back into the market. Bannister believes that the economy is slowing down and could potentially enter a recession, which would lead to a bear market. Inflation, in particular, is a concern for Bannister, as he believes it is higher than many people expect.
Bannister has been vocal about his concerns regarding the stock market’s high valuations this summer. He has predicted a 10% market correction that could push the S&P 500 down to 5,000 by October. Even at that level, stocks would still be considered fairly expensive. Bannister pointed to inflation as a key factor driving further declines in the market, noting that it has been „a little stickier than people expect.“
The Federal Reserve has a target of 2% inflation, but Bannister believes that the central bank will likely aim for closer to 3% by the fourth quarter due to persistent housing inflation. He anticipates a significant rebound in housing inflation by 2025, which could create more pricing pressure. Bannister is skeptical of the Fed’s ability to achieve its 2% inflation goal, calling it „just a pipe dream.“
Looking ahead, Bannister is also concerned about weak GDP, consumption, fixed asset investment, and net export data expected in the second half of the year. These factors do not bode well for the economy and could further impact the stock market. Bannister emphasized that while brokers may love bull markets because they sell stock, the market is naturally prone to swings from one extreme to the other.
In conclusion, while stocks may be up since last week’s sell-off, there are still reasons to be cautious. Bannister’s warnings about inflation, a potential market correction, and economic indicators suggest that investors should proceed with care. It’s essential to stay informed, monitor market conditions, and consider the potential risks before making any investment decisions.