Stifel predicts S&P 500 to rise 10% then plunge in 2025

A fresh market commentary from Stifel says the S&P 500 may experience another leg higher followed by a sharp decline in 2025.

The firm's strategists predict that the index could see a 10% increase before reversing course next year, potentially falling back to levels observed at the beginning of 2024. This would see the U.S. benchmark index rising to about 6,400.

Despite positive sentiment surrounding the U.S. economy and potential Federal Reserve interest rate cuts, the benchmark index is expected to plummet by 26% to approximately 4,700 in 2025.

Stifel analysts argue that the current overperformance of growth versus value stocks is reminiscent of patterns that have historically preceded bear markets. The assessment comes amid concerns that if the Federal Reserve continues to lower rates into 2025 without a recession, it could hinder the return to a 2% inflation target, with investors ultimately bearing the consequences.

Strategists expressed their views with a metaphorical touch, comparing the market situation to a 'Groundhog Day' reminiscent of the dot-com era. Moreover, they warned that the aftermath of past market manias has often resulted in weak returns over the following decade.

Source: Investing.com