Barry Bannister, a top Wall Street strategist known for his bearish outlook, believes the stock market has bottomed out for now. Bannister, a chief strategist at Stifel, predicts a zigzagging S&P 500 resembling a “W” pattern this year. Despite a recent dip, he expects the S&P 500 to bounce back toward 5,800 thanks to cooling recession fears.
The S&P 500 tries to end the week higher even as uncertainty rises. It's @KristenScholer with the Market Update. pic.twitter.com/NTgnNpbGQa
— NYSE 🏛 (@NYSE) March 21, 2025
However, he warns of another dip later in the year due to inflation concerns.
Bannister describes the market as “coming off one of the W’s troughs.” After falling into correction territory last week, the market seemed due for a rebound, which started during trading sessions on Friday and Monday. Despite these gains, stocks fell again on Tuesday, with the S&P 500 sitting around 5,600 as of Tuesday morning.
The S&P 500 has been up the past 3 Fridays. Currently down 0.2% with two hours to go.
Hasn't hit 4 in a row since August of last year.
— Ryan Detrick, CMT (@RyanDetrick) March 21, 2025
Bannister projects this rally may hit a ceiling of around 5,800 before another decline. “Most definitely, it will fail the old high of 6,144,” he said.
He foresees a decline back toward 5,500, driven by a resurgence in inflation in the second half of 2025, which he believes will hurt consumer spending.
While the S&P 500 index is down 10% from its high, the Bloomberg US Aggregate bond index is only 1.8% from its 52-week high. It’s nice to see bonds not only paying investors a positive real yield, but now also providing some buffer against equity drawdowns.
At a yield of 4.3%,… pic.twitter.com/8tfmubUfUW— Jurrien Timmer (@TimmerFidelity) March 21, 2025
What we are concerned about later in the year is a double-dip slowdown where inflation proves sticky,” Bannister explained. Stagnant wages and rising inflation could squeeze real wages, reducing consumption.
Regarding investment strategy, Bannister focuses on three types of trades: value, international, and small-cap stocks. He uses a “3-2-1 mix” — three parts value, two parts international, and one part small-cap. This strategy is based on his broader view that U.S. growth stocks, particularly the “Magnificent Seven” that have led the market over the past 15 years, are losing their dominance.
Let’s not forget the first five days rule 🚨When stocks finish green after the first 5 days of trading in the new year, the S&P 500 has finished with a year-end gain 83% of the time, along with an average gain of 14%, according to the Stock Trader's Almanac (data back to 1950). pic.twitter.com/yzh9WLtXWu
— Barchart (@Barchart) March 23, 2025
Strategist predicts S&P 500 fluctuation
Historically, the outperformance of growth stocks versus value stocks tends to reverse after reaching certain peaks. Bannister is attracted to international stocks, especially in Europe, because of increased fiscal spending by governments. He also believes that slightly higher inflation will benefit small-cap stocks.
Bannister suggests funds that offer exposure to these strategies, such as the iShares S&P 500 Value ETF, the Vanguard Total International Stock ETF, and the Dimensional US Small Cap ETF.
