S&P 500 to fall 500 points and getting to 2% inflation soon is ‘pipe dream,’

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Stifel Financial is predicting a rough road ahead for the S & P 500 . The investment bank forecasts the benchmark stock index will tumble about 500 points to 4,750 in the second or third quarter — a correction of roughly 10%. “We have been of the view that the ~5 quarters 1Q22 to 2Q23 were a ‘pseudo-recession’ and the Fed already harvested all the normal post-recession disinflation we would expect,” chief equity strategist Barry Bannister wrote in a note on Sunday. “As a result, the sustained 2% Core PCE inflation the Fed seeks is a pipe dream.” Although conditions have eased, the demand for labor still exceeds supply, he noted. Bannister also expects the manufacturing purchasing managers’ index to rise, signaling that wage growth will remain resilient into the first quarter of 2025. In addition, the worker productivity surge since 2022 has likely topped, which would also be inflationary, Bannister said. Stifel’s inflation model shows a jump in core personal consumption expenditures to just over 3% in the second half of this year. “With rates normalized and the mid-2024 pop in Core PCE to just over 3% that our models indicate, we expect Fed rate cuts to be pushed back further, causing a middle quarters correction for equities,” Bannister wrote. The S & P 500 is up about 9.5% year to date.



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