By Ian Salisbury

The prominent Wall Street forecaster who predicted the market's March 13 correction says stocks will bounce back -- but only in the short term. Investors should protect themselves with defensive assets like utility stocks and gold, he warns.

Through much of last year, Stifel's Chief Equity Strategist Barry Bannister was a lonely voice on Wall Street, calling for a stock market pullback as the S&P 500 climbed higher and higher. The market has finally proved him right.

Last week the S&P 500 entered correction territory -- a 10% decline from the previous peak -- although it has since regained a bit of ground. On Thursday, the index was up 0.4%, or 25 points, to 5670, after the Federal Reserve offered a cautious take on the economy at its Wednesday meeting.

Overall, in the past month, the S&P 500 has tumbled 7.6% from its Feb. 19 all-time high.

The upshot is that the S&P 500 is already close to Bannister's full-year 2025 target of 5,500. (Its March 13 intraday low came even closer, when index briefly declined to 5505.) He reiterated the 5500 target on Thursday -- suggesting the market has now shed enough value and will end the year more or less flat with where it is today.

The S&P 500 tumbled as investors began seriously consider the prospect of U.S. economic slowdown.

"But," Bannister writes, "this is not yet a 'recession' which in typical (even in mild recessions) is associated with bear markets."

Bannister's call comes as several more bullish forecasters, including Yardeni Research and Goldman Sachs, have been cutting theirs to reflect uncertainty surrounding the Trump administration's trade policies. It's worth noting, however, both Yardeni and Goldman Sachs remain significantly more bullish than Bannister. Yardeni sees the S&P 500 finishing the year at 6400 in the "best case," while Goldman's target is 6200.

While Stifel's Bannister left his full-year target unchanged, he sees stocks bouncing around quite a bit in the meantime. He thinks the S&P 500 is due for a "relief rally" following the latest selloff, and predicts the index 500 will climb to around 5850 by midyear -- before fading again in the second half.

His logic: Investors sold stocks as a knee-jerk reaction on news of President Donald Trump's controversial trade policies, which include tariffs against China and allies like Canada and Mexico. Investors will start buying again when it becomes clear a recession isn't imminent, he says. However, the economy's broader problems, such as inflation and slowing growth, aren't going to be solved anytime soon, leading the midyear rally to lose steam.

How should investors deal with all this volatility? Bannister argues investors should favor defensive value stocks in sectors like utilities; healthcare, including drug and medical equipment companies; as well as household product firms and consumer staples retailers.

Bannister also likes gold, which has rallied sharply while stocks sold off. The precious metal hit a record high Wednesday, with Comex Gold for March delivery hitting $3,036 an ounce.

Write to Ian Salisbury at ian.salisbury@barrons.com

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March 20, 2025 12:19 ET (16:19 GMT)

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