A sudden economic shock can deliver the top of the present inventory market euphoria, Stifel warned. Stifel’s Thomas Carroll and Barry Bannister wrote in a Monday word that an economic slowdown may be within the playing cards. That in flip can imply unhealthy information for shares regardless of the rally to all-time highs seen this yr. “As markets charge to all-time highs (with very extended valuations), we are left to wonder what can break up the ‘party like it’s 1999’ atmosphere?” the pair wrote. “The lesson of history is that it is usually a sudden economic slowdown, which is what we forecast for 2H 2025.” Carroll and Bannister stated to anticipate “stagflation,” which is marked by excessive inflation and unemployment in addition to stagnant economic progress. The duo stated the sort of setting is already slowing areas of client spending, although the unreal intelligence capital expenditure buildout and tariff pre-buying have helped masks issues. .SPX YTD mountain SPX yr to date They stated they’re “uncomfortable” with the S & P 500 being greater than 30% off its intraday low on April 7. That rally comes even because the “economy slows to a crawl,” they stated. “Valuation doesn’t matter until it does,” the strategists stated, citing 1929, 1999 and 2021 as three examples. Now, they stated the S & P 500 may fall up to 14% from its latest excessive. They have a worth goal of 5,500 for the benchmark index, which means a 6.5% lower on the yr. That’s thought-about a comparatively low goal for the broad index by Wall Street. “‘Hopium’ is a powerful drug,” they wrote. “But we abstain by recommending investors overweight Defensive Value (Staples, Healthcare, Utilities, Quality) in front of a sudden (likely 3Q25, a few months in advance of late-2025 GDP) S & P 500 correction.”