The Wall Street analyst who predicted the 2018 market swoon is back. But this time with an even more pessimistic forecast.
Instead of banking on a V-shape recovery, investors should be prepared for a long road ahead. (Market Watch)
“Our S&P 500 model points to a long road back to a price over 3,000 for the S&P 500, probably due to major stress on growth versus value (amid populist reflationary policy),” wrote Barry Bannister, head of institutional equity strategy at Stifel, in a Tuesday note.
How long is the road? About five years, according to Bannister, who sees growth stocks, which led the way higher in the recently ended bull market, either underperforming value stocks or engaging in a back-and-forth leadership tradeoff. Growth refers to shares of companies that grow earnings faster than their peers. Value refers to shares of companies that investors believe are undervalued relative to their peers or certain metrics.
Bannister in early 2018 had warned that interest rate hikes by the Federal Reserve ran the risk of triggering an unusually fast bear market. Stocks in December 2018 came within a whisker of a 20% pullback. More recently, Bannister in February raised his year-end target to 3,450 from 3,260, arguing that cyclical stocks were poised to outperform the broader market after taking a hit from fears surrounding the spread of COVID-19 in China.
Stocks were trading higher Tuesday, clawing back a chunk of the ground lost a day earlier in the biggest one-day plunge for the Dow Jones Industrial Average DJIA, -4.631% and the S&P SPX, -4.404% since the October 1987 crash.