A sudden economic shock can bring the end of the current stock market euphoria, Stifel warned. Stifel’s Thomas Carroll and Barry Bannister wrote in a Monday note that an economic slowdown could be in the cards. That in turn can mean bad news for stocks despite the rally to all-time highs seen this year. “As markets charge to all-time highs (with very extended valuations), we are left to wonder what can break up the ‘party like it’s 1999’ atmosphere?” the pair wrote. “The lesson of history is that it is usually a sudden economic slowdown, which is what we forecast for 2H 2025.” Carroll and Bannister said to expect “stagflation,” which is marked by high inflation and unemployment as well as stagnant economic growth. The duo said this type of environment is already slowing areas of consumer spending, though the artificial intelligence capital expenditure buildout and tariff pre-buying have helped mask problems. .SPX YTD mountain SPX year to date They said they’re “uncomfortable” with the S & P 500 being more than 30% off its intraday low on April 7. That rally comes even as the “economy slows to a crawl,” they said. “Valuation doesn’t matter until it does,” the strategists said, citing 1929, 1999 and 2021 as three examples. Now, they said the S & P 500 could fall up to 14% from its recent high. They have a price target of 5,500 for the benchmark index, which implies a 6.5% decrease on the year. That’s considered a relatively low target for the broad index by Wall Street. “‘Hopium’ is a powerful drug,” they wrote. “But we abstain by recommending investors overweight Defensive Value (Staples, Healthcare, Utilities, Quality) in front of a sudden (likely 3Q25, a few months in advance of late-2025 GDP) S & P 500 correction.”
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