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WITH RISKS STILL SKEWED TO THE DOWNSIDE, STIFEL PREFERS TO PLAY DEFENSE

Some investors may be anticipating that the deeply cyclical segment of GDP is strengthening, but equity strategists at Stifel would fade that view.

Barry Bannister, chief equity strategist at Stifel, believes there are significant obstacles in the way of more than just a fleeting "pop" in the U.S. PMI Manufacturing index, as he sees an abundance of economic headwinds for the S&P 500 as 2025 progresses.

"The expensive S&P 500 appears to us caught in a trading range of 5,850 +/- about 5% (our target is 5,500), bounded by Pavlovian dog 'buy-the-dip' on one side and economic risk (weaker GDP, sticky inflation, i.e., moderate stagflation) on the other side in 2025," writes Bannister in a note out this week.

(His 5,500 target is around 6.5% below the current S&P 500 index .SPX level, and around 10.5% below the February record intraday high).

Bannister continues to recommend an over-weight of defensive value (e.g., staples, healthcare, utilities) and more defensive factor proxies (quality, low volatility, gold) given his view that the S&P 500 "appears to have risks skewed to the downside."

(Terence Gabriel)

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