No ‘Textbook’ Recession Anytime Soon, Says Stifel Strategist As S&P 500 Will Level Out

A man looks at his mobile phone to check stock market performance, graphs, data, prices and shocks in L'Aquila, Italy, on March 28, 2023. LORENZO DI COLA/BENZINGA 

Barry Bannister, the chief equity strategist at Stifel reportedly said there won’t be a textbook recession anytime soon and that he expects the S&P 500 to begin to level out around the 4,400 level in the third quarter.

CEO of DoubleLine Capital Jeffrey Gundlach and Contributing Editor at Vanity Fair Bethany McLean speak onstage during Vanity Fair New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 3, 2017, in Beverly Hills, California. MATT WINKELMEYER/BENZINGA

“Since October 2022, economic resilience and policy prudence indicated to us no immediate ‘textbook’ recession. Recessions and bear markets are surprises and not so widely (perhaps universally?) anticipated,” Bannister wrote in a Tuesday research note, according to a Fortune report.

He also argued that a recession won’t hit this summer as many on Wall Street anticipate. A “textbook” recession refers to two continuous quarters of negative GDP growth.

“Most gains since October 2022 were cyclical growth (tech, et al.), but now we see cyclical value in a catch-up P/E-led rally to 3Q [2023],” he said about the cycles.”

Notably, Bannister had claimed earlier that the National Bureau of Economic Research (NBER) would not declare a recession in the first half of the year, according to the report.

And despite inflation and rising interest rates, the economy has remained resilient. The GDP of the United States rose 1.1% in the first quarter alone, and the unemployment rate hangs on at a pre-pandemic low of 3.7% as of May 2023. 

Wall Street is divided about the possibility of a recession. For instance, DoubleLine Capital CEO Jeffrey Gundlach said it looks increasingly possible the U.S. will tip into a recession.

However, Gundlach’s take stands in contrast to Goldman Sachs’ prediction about the economy. The investment bank has revised its estimate about the U.S.’ chance of entering a recession over the next 12 months, reducing its judging probability from 35% to 25%.

In the wake of economic resilience and the optimism surrounding A.I., Bannister expects this year’s stock market rally to continue for some more time, although at a gradual pace.

“We see the S&P 500 beginning to level out around 4,400 in 3Q [2023], wrapping the bull market from October 2022 lows,” he wrote on Monday, according to the report. “Most gains since October 2022 were cyclical growth (tech, et al.), but now we see cyclical value in a catch-up P/E-led rally to 3Q [2023],” he wrote.

Produced in association with Benzinga

Edited by Alberto Arellano and Jessi Rexroad Shull