Stifel's Market Predictions

(Reuters) – Stifel expects the S&P 500 index to peak in the first half of 2025 before declining by 10% to 15% in the latter half due to concerns about slower economic growth and persistent inflation.

The brokerage anticipates the U.S. stocks benchmark to dip to the mid-5,000s by late next year, presenting a bearish outlook in contrast to Goldman Sachs and Morgan Stanley, which predict the index will finish 2025 at 6,500. The index was last trading at 6,075 points.

A potential correction in stocks could arise as the U.S. real gross domestic product is forecasted to slow to 1.5% in the second half of 2025, with core personal consumption expenditure inflation remaining above the Federal Reserve's target. Stifel strategists have remarked that "the environment does not appear conducive to continued equity mania," favoring more defensive sectors.

The S&P 500 has performed strongly this year, rising approximately 27%, largely driven by the so-called 'Magnificent 7' stocks benefiting from the artificial intelligence boom and expectations of lower interest rates.

Stifel predicts the Federal Reserve will pause its rate-cutting cycle, maintaining rates at 4% during its January policy meeting, which poses risks to the markets around mid-2025.