Many across Wall Street have remained bullish even as President Donald Trump fans the flames of the trade war again this week, but Barry Bannister, chief equity strategist at Stifel, isn’t feeling as upbeat.
While banks including Goldman Sachs and Bank of America raised their S&P 500 year-end targets on Tuesday, Bannister is doubling down on his bearish view and calling for a 12% correction in the second half of 2025. He expects the S&P 500 to end the year at 5,500.
“They’re not really thinking outside the box with big bold numbers,” Bannister said of the strategists raising their targets on CNBC on Tuesday. “We actually see, again, some weakness in the second half.”
“I would be cautious because there are signs consumers could slow down,” he added.
Lackluster early hours Amazon Prime shopping activity — down 14% from last year, according to data analytics firm Momentum Commerce — could be a sign that US shoppers are under more stress than markets anticipated.
It’s not just consumers who are pulling back. Companies are also likely to reduce their capital spending in light of additional tariff volatility, further cooling the economy. Across the board, market experts are forecasting slower GDP growth in the second half of the year thanks to a slowdown in consumer spending and a weakening labor market.
In addition to lower spending, persistent inflation and stagflation are signs that the stock market is on track for a pullback, Bannister said. A stagflationary economy would lower S&P 500 earnings and deal a blow to the Big Tech companies that have been leading the stock market, Bannister believes.
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He also expects core PCE, which excludes food and energy, to rise above 3% by year-end as tariff impacts make their way into prices. In of May, core PCE was 2.7%.
In this scenario, the Fed’s hands would be tied and rates would remain high, Bannister said.
Bannister isn’t expecting a 20% pullback like the one markets experienced back in April, but he’s skeptical of the overly bullish sentiment in markets.
“You get an echo of what we saw in the first four months of the year, echo being half as bad,” Bannister said. “But still, an echo of what we just saw on the stagflationary trades.”
