Stifel expects S&P 500 to peak in early 2025 before falling

(Reuters) - Stifel expects the S&P 500 index to peak in the first half of 2025, then fall 10% to 15% in the second half of the year, the brokerage said on Thursday citing concerns about slower economic growth and sticky inflation.

The brokerage expects the U.S. stocks benchmark to drop to mid-5,000s late next year, a bearish view on the market when compared to Goldman Sachs and Morgan Stanley, which see the index end 2025 at 6,500. It was last trading at 6,075 points.

A correction in stocks could be triggered by the U.S. real gross domestic product slowing to 1.5% in the second half of 2025 and core personal consumption expenditure inflation staying above the Federal Reserve's target, Stifel strategists noted.

"The environment does not appear conducive to continued equity mania and we prefer more defensive sectors," they added.

The S&P 500 has had a strong run this year, rising about 27% so far, boosted by the so-called 'Magnificent 7' stocks rising on the artificial intelligence boom and anticipation of lower interest rates.

Stifel expects the Fed to pause its rate-cutting cycle, holding rates at 4% at its January policy meeting, posing risks to the markets around mid-2025.

(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Shreya Biswas)

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