Investing.com — Stifel is setting expectations for a volatile 2026, projecting the S&P 500 will trade within a 6,500 to 7,500 corridor next year as macro uncertainty persists.
In its latest strategy update, analyst Barry Bannister said the firm is approaching the year by weighing “upside potential versus downside risk” after what it describes as having “fallen into a bear trap” following the tariff pivot in April 2025.
On the bullish side, Stifel argues that low-teens S&P 500 EPS growth in 2026, paired with only “one multiple of normal S&P 500 P/E compression,” would lift the index to roughly 7,500, or “just over +9%.”
The analysts note that a 9% gain would be “just the average annual S&P 500 price gain in the past 60 years.”
Bannister explained that the scenario assumes that earnings from non-tech cyclicals, which have been under pressure, finally start to come through.
However, the firm also outlines a clear bear case. With real personal consumption making up 68% of GDP, Stifel warns the consumer remains “too large to be offset by AI capex” if spending cracks.
The analysts assign a 25% recession probability, which would push the S&P 500 down to 6,500, or about –5% from current levels.
They caution that “labor looks tenuous in 2026,” and that a pullback in demand could expose vulnerabilities masked by slowing labour supply growth.
Stifel also flags valuation risks, writing that “P/E doesn’t matter…until it’s [the] only thing that matters,” and highlighting that speculative assets have “already tumbled.”
Against this backdrop, the firm recommends hedging Big Tech exposure with Defensive Growth and Defensive Value sectors such as healthcare, staples and gold.
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