Bannister is skeptical about the US economy's ability to sustain its current growth rate, predicting GDP growth to slow to just over 1% by December 2025. He suggests that with wage growth declining and inflation remaining sticky, real wage growth could shrink, impacting consumer spending. Bannister compares the current economic situation to mid-cycle slowdowns experienced in 2011 and 2015-2016. While his outlook is contrary to the consensus, he acknowledges that if the market's enthusiasm for AI persists and the economy achieves a soft landing, his predictions could be incorrect. Nonetheless, he cautions that high valuations leave little room for error in the coming year.
Key takeaways:
- Wall Street strategists are generally bullish on the S&P 500, with many setting targets above 6,700 for 2025.
- Stifel's Barry Bannister predicts negative returns for the S&P 500, with a target of 5,500, citing concerns over AI-driven valuations, inflation, and interest rates.
- Bannister believes that elevated valuations and potential lack of rate cuts could lead to muted future returns and increased bond yields, making stocks less attractive.
- He is skeptical about the US economy's ability to sustain its current GDP growth rate, predicting a slowdown to just over 1% by December 2025.