Home Editor's Picks Stifel sees S&P 500 correcting 10% from here by Q3

Stifel sees S&P 500 correcting 10% from here by Q3

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Stifel analysts foresee a notable correction for the S&P 500, predicting a 10% drop to approximately 4,750 by the end of Q3 2024 amid persistently high inflation and the Federal Reserve’s limited ability to ease monetary policy.

“We detect a dichotomy between actual S&P 500 performance the past 2½ years and investor enthusiasm,” Stifel strategists noted, poignant out that the inflation-adjusted S&P 500 has not seen real gains since December 2021.

According to Stifel, this scenario suggests a potential transition from a Secular Bull Market to a Secular Bear Market, “which is a much more treacherous period for investors, particularly buy-and-hold,” they wrote.

Key factors driving this anticipated correction include sticky inflation, which is expected to rise slightly in the second half of 2024. These inflationary pressures restrict the Federal Reserve’s ability to cut rates, despite sluggish economic growth, Stifel explained.

Strategists expect the S&P 500’s price-to-earnings (P/E) ratio is expected to decline by about two multiples, translating to a 500-point drop by the third quarter.

Against this backdrop, the investment banking firm favors Defensive Value equities, such as Healthcare, Consumer Staples, Utilities, and Quality sectors, which are projected to offer more stability through the end of Q3 2024.

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