Stifel expects the S&P 500 to fall 12% by the end of the year. What risks did he warn about?

A strategist from Stifel predicted a 12% drop in the main US index S&P 500 by the end of 2025. Among the key risks against the background of a new aggravation of the White House trade policy, the analyst named a slowdown in consumer demand and inflation. In his opinion, US GDP growth will slow down in the second half of the year, and the probability of stagflation will increase.

The main U.S. stock index, the S&P 500, will end the year at 5,500 points, predicted Stifel's chief equity strategist Barry Bannister. His scenario implies that the S&P 500 will fall about 12% from current values in the second half of the year. Stifel doesn't expect a repeat of the collapse that occurred after "Emancipation Day" in April, when Donald Trump announced massive trade duties, but believes the market is overly optimistic right now.

"We may be in for something of an 'echo' of the first few months of the year - not as sharp, but tangible," Bannister noted on CNBC. - It will be a sort of mild return to a stagflationary scenario."

According to strategist Stifel, Wall Street analysts raise forecasts for the index, but do so out of inertia - without considering the risks. "And we are just seeing signals of an impending downturn in the second half of the year. I would be cautious, because there are signs that consumer activity may be slowing," Bannister added. Alarming, for example, is the weak start of Amazon's Prime Day sale, Business Insider noted. Demand on the first day was 41% lower than last year, data from Momentum Commerce (which sells about 50 brands on Amazon, including Crocs and Beats) showed. That could suggest that financial pressures on U.S. consumers have been stronger than investors had hoped, the publication adds.

It's not just consumers who have started saving money, but businesses as well. Companies will also reduce capital expenditures due to the unstable trade policy, which will further cool the economy, according to Business Insider. Many experts predict a slowdown in U.S. GDP growth by the end of the year - amid weakening demand and deteriorating labor market, adds the publication. Inflationary pressures and the first signs of stagflation are adding to this, Bannister points out.

According to Stifel, such dynamics will reduce the profits of companies in the S&P 500 index and will especially negatively affect the technology giants that have so far kept the market afloat. He also expects inflation - the core PCE index, which excludes food and energy prices - to climb above 3% by the end of the year because of the impact of duties on prices. In May, that figure was 2.7%, with the Fed's target of 2%. In such a situation, the Fed will be bound and unable to cut rates, the strategist warns.

In trading on July 9, the S&P 500 index was up about 1% to 6,269 points. It set a record high of 6284.65 points on July 3, thanks to strong U.S. jobs data that allayed investor fears about the possibility of a slowdown in the world's largest economy. The U.S. benchmark fully recovered its losses after collapsing by 20% amid fears of Trump's duties and now has gained more than 6% since the beginning of the year;

On Tuesday, BofA strategist Savita Subramanian increased the S&P 500's target level for the end of 2025 to 6,300 points from the previous 5,600: this implies growth of just 1.2% from the July 8 close. The analyst didn't see any growth drivers that would allow the index to continue rising in the third quarter. According to her, the latest economic data is rather disappointing, and the key source of corporate profits - earnings of technology companies - is in danger of slowing down.

Evercore ISI strategist Julian Emanuel advised investors to "buckle up": he compared the first half of 2025 in the U.S. market to a roller coaster ride. "As on a real roller coaster, the initial acceleration from the bottom was as rapid and volatile as the end of the fall," he emphasized. The expert warned: having reached the top, the market is ready for further mood swings and sudden declines. According to Evercore's forecast, by the end of 2025, the level of S&P 500 may reach 5600 points, that is, it may fall by 10%.

Goldman Sachs is looking more optimistic about the future prospects for U.S. stocks. The investment bank expects that the S&P 500 will grow by 3% in three months and by 6% by the end of the year - to 6,400 and 6,600 points, respectively. Goldman Sachs' reason for optimism was the expectation of Fed policy easing, lower bond yields than their previous forecasts, strong results from large companies and that investors are willing to turn a blind eye to a possible short-term dip in earnings. However, the bank warned that the situation could both improve and worsen and the outlook could be revised after the second quarter reporting season is over.

This article was AI-translated and verified by a human editor