An IMGW News Report
Barry Bannister, chief strategist at Stifel Financial Corp., one of America’s leading independent investment banks, sees a choppy year ahead for equities. The firm, founded in 1983 and listed on the New York Stock Exchange since 1986, is known for its in-depth market research and advisory services. Bannister, one of Wall Street’s most bearish forecasters coming into 2025, argues that the S&P 500 is tracing a ‘W’-shaped pattern—rising towards 5,800 before retreating once more under the weight of stubborn inflation.
“This shift carries significant implications for wealth managers and family offices, which have long favoured large-cap growth stocks as core holdings.”
“The market is zigzagging,” Bannister told Business Insider. “If I had to put a letter on it, it would look a little bit like a W.”
Stocks, he believes, are in the early stages of a rebound following last week’s correction, with momentum pushing the index toward 5,800. However, he warns that this rally will likely falter short of its previous peak of 6,144. He expects another downturn later in the year as inflation resurges, squeezing real wages and dampening consumption.
His outlook suggests a second dip to around 5,500 as the economy faces a “double-dip slowdown.”
Against this backdrop, Bannister is repositioning towards a ‘3-2-1 mix’ of value stocks, international equities, and small caps—believing that the era of outsized gains from US growth stocks, particularly the so-called ‘Magnificent Seven’, is fading.
“The S&P 500’s price-to-earnings ratio and the relative outperformance of growth stocks over value have both peaked,” he noted, pointing to historical precedents where such conditions herald a shift in market leadership.
This shift carries significant implications for wealth managers and family offices, which have long favoured large-cap growth stocks as core holdings. As volatility rises and inflation pressures mount, asset allocators may need to rebalance portfolios towards value and international equities to preserve returns. Private capital managers, too, could see greater demand for alternative investments as high-net-worth individuals seek stability beyond traditional equity markets.
European equities appear particularly attractive as governments ramp up fiscal spending, while small caps should benefit from moderate inflation. Investors seeking exposure to this theme, he suggests, may look at funds such as the iShares S&P 500 Value ETF (IVE), the Vanguard Total International Stock ETF (VXUS), and the Dimensional US Small Cap ETF (DFAS).
The forecast, though cautious, marks a departure from Bannister’s previously pessimistic stance. For now, at least, the worst may be over—before the next wave of volatility arrives.
