A strategist who anticipated the 2023 rally says he expects stocks to go nowhere for the rest of the year, while potentially struggling in 2024 as well, as corporate earnings growth fails to live up to Wall Street’s overly optimistic expectations. Barry Bannister, an equity strategist at Stifel, said in a report shared with MarketWatch late Wednesday that he believes this year’s rally, spurred by relief that a U.S. recession wouldn’t arrive in 2023, has run its course.
He now expects the S&P 500
to trade sideways for the rest of the year, ultimately finishing at 4,400, roughly 68 points lower from where the index closed on Wednesday, according to FactSet data. However, investors can still find opportunities as sectors that have lagged behind the market leaders. Based on this view, Bannister sees opportunities in so-called “pair trades” like shorting Big Tech stocks, while buying financials, materials, industrials stocks and other cyclical growth stocks that have underperformed. He also expects the equal-weighted S&P 500 index
to beat the traditional capitalization-weighted S&P 500 in the second half. These trades would have already paid off over the past month. Since the start of corporate earnings season in mid-July, the equal-weighted S&P 500 has risen 2.4%, according to FactSet data, compared with 1.6% for the traditional S&P 500. Over the same period, several members of the “Magnificent Seven” group of megacap technology stocks that Bannister is recommendin …