Stifel's Barry Bannister is standing by his call for a summer rally in the middle of a secular bear market.
Since Bannister first unveiled his call for a “summer rally” — a call that landed shortly after stocks hit their “peak hawkishness”-inspired bottom last month — the S&P 500 SPX has advanced more than 5%. And according to Bannister, the rally could have at least another 5% — or more — to go over the coming weeks.
Bannister, who contends that stocks have entered a secular bear market, expects the bounce to be led by cyclical growth stocks, like the tech stocks that led the market lower earlier this year. For what it’s worth, the Nasdaq Composite COMP is up more than 7% over the past month, compared with a 6% gain for the S&P 500.
What’s more, Stifel doesn’t see a recession arriving before the end of the year. This is quickly becoming a contrarian view on Wall Street, as many of the biggest financial supermarkets in the U.S. are adjusting their own expectations to accommodate what many see as the rising risk that a U.S. recession is either imminent, or perhaps has already arrived.
According to Stifel, the inversion of the 2-year TMUBMUSD02Y versus 10-year measure of the yield curve — seen as a historically reliable recession warning flag — isn’t enough. Instead, the 50-day moving average of the three-month Treasury bill yield TMUBMUSD03M must eclipse the 50-day moving average of the 10-year note yield TMUBMUSD10Y for an extended period before it becomes a truly reliable indicator of a recession, he argued.
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