"The Big Short on Wall Street": S&P 500 Index will fall to 5000 in October!
The U.S. stock market experienced its worst day since 2022, but strategist Barry Bannister says it is still too early to return to the U.S. stock market. He predicts that the S&P 500 index will fall to 5,000 points in October. He advises investors to maintain a "defensive posture" and is optimistic about sectors such as healthcare, consumer staples, and utilities. His forecast makes him one of the few persistent bears on Wall Street
Concerns about the weakening US economy triggered a global market sell-off, with the US stock market experiencing its worst day since 2022 on Monday, followed by a rebound on Tuesday.
However, Stifel's Chief Equity Strategist Barry Bannister stated that it is still too early to return to the US stock market, reiterating his view that the S&P 500 Index will fall to 5000 points in October.
In a report on Monday, Stifel's strategist team led by Bannister stated, "Our view remains that the S&P 500 Index will correct to 5000 points in October, down 12% from the peak in July, due to a significant slowdown in the US economy while inflation remains stubborn."
They wrote, "While we describe a lower double-digit correction, there is a risk of the market entering a bear market if the economic slowdown evolves into a recession. Historically and by definition, an economic recession would catch investors and the Federal Reserve by surprise."
Market corrections typically occur when stock indices drop at least 10% from recent bull market highs. Some corrections may further deteriorate into a bear market, usually involving a drop of at least 20% from recent peaks.
The S&P 500 Index last entered correction territory on October 27, 2023, but the recent market sell-off has pushed the benchmark index to the edge of another correction. According to Dow Jones market data, the S&P 500 Index has fallen 7.5% from the recent closing high of 5667 points on July 16.
Bannister had previously predicted a sell-off in the summer and reiterated his view on a market correction in October.
His forecast has made him one of the few consistent bears on Wall Street, as most other market strategists tend to be optimistic and have raised their year-end target prices for the S&P 500 Index, expecting multiple rate cuts by the Federal Reserve later this year.
Bannister and his team advise investors to maintain a "defensive posture," stating that if inflation remains stubborn and US GDP growth significantly slows, they expect "defensive value" sectors to outperform the S&P 500 Index in the second half of 2024, such as healthcare, consumer staples, and utilities sectors.
Strategists suggest that these sectors are less sensitive to economic activity, making them more attractive to investors concerned about an economic recession.
According to FactSet data, the US stock market closed higher on Tuesday, with the S&P 500 Index and Nasdaq Composite Index each rebounding over 1%, while the Dow Jones Industrial Average rose 0.8%