S&P 500 to Deliver Little Returns Into Early 2030s: Stifel

Don’t look to U.S. stocks for big gains next year — or for at least the next decade.

That’s the bold take from Stifel Nicolaus & Co.’s Barry Bannister, one of a few Wall Street strategists who predicted the rally in the first half of 2023.

He’s doubling down on his view that returns on the S&P 500 Index, adjusted for inflation, will be roughly flat until the early 2030s against a backdrop of reinflationary economic growth. The call comes as other market forecasters turn more optimistic on U.S. stocks for the new year.

The U.S. equity benchmark in real terms, adjusted for Consumer Price Index inflation and with dividends reinvested, peaked at 5,300 in December 2021 and has been lower ever since — what Bannister says is a characteristic of a secular bear market.

The type of high-level S&P 500 performance seen in the decade prior to 2021, “is gone for a generation,” Bannister warned Monday in a note to clients.

Earlier this year, the strategist said the U.S. equity gauge would stall out for the decade as the Federal Reserve returns to “policy modulation at normalized rates,” with broadly tighter financial conditions thwarting corporate earnings growth.

2024 Outlook

Stifel does not expect the U.S. central bank to cut rates in the first half of next year.

Meanwhile, Bannister upgraded his mid-year S&P 500 forecast for 2024 to 4,650 from 4,400 previously, citing “economic growth, inflation and Federal Reserve tightness all proving resilient.”

The upwardly revised target still implies a meager increase of less than 2% over the next six months from where the index was trading on Monday.

As part of his view, Bannister expects mega-cap growth to lose some ground to cyclical value mid-next year.