Stifel warns of rapid slowdown risk for stocks

A Stifel note warns that a rapid slowdown could derail the year’s rally and push the S&P 500 lower.

Stifel Sees Sudden Slowdown Ending Stock Market Rally

Stifel analysts Thomas Carroll and Barry Bannister warn that a sudden economic slowdown could end the current market euphoria. In a Monday note, they say 2H 2025 may bring a stagflation environment with high inflation, rising unemployment, and weak growth. They note that AI capital expenditure and tariff pre-buying have helped mask problems, but slower consumer spending is growing louder. They see the S&P 500 potentially falling up to 14 percent from its recent high and set a price target of 5,500 for the index, a roughly 6.5 percent downside for the year. They caution that valuations are extended and the rally may be riding on thin ice, adding that the market has not yet proven durable against a real slowdown.

The warning taps a familiar tension between optimistic markets and fragile macro signals. If growth slows, investors tend to shift toward quality and defensives, and market breadth often narrows. This view also invites scrutiny of how much leverage and tech spending can cushion a downturn before earnings fail to support lofty prices. The call to overweight Defensive Value reflects a shift in mindset as risk appetite contracts amid uncertainty about inflation and jobs.

Highlights

Markets will test whether macro signals can outpace headlines.