A query looms over Wall Road because it digests the inventory market highs within the canine days of summer time 2025: Is that this one other model of the dotcom bubble? Apollo’s Torsten Slok has already calculated that the highest 10 S&P 500 firms right now are extra overvalued than within the late ’90s tech growth. Now the funding financial institution Stifel is predicting that at the same time as “euphoric markets occasion prefer it’s 1999,” a inventory market correction and stagflation are forward.
Stifel’s strategists, led by Barry Bannister and Thomas Carroll, wrote in a analysis observe that they’re merely “uncomfortable” with the S&P 500 gaining 32% off its April 7 intraday low as the most recent GDP figures present the precise financial system slowing virtually to a crawl. They additional warn that “hopium” is a strong drug and that inventory markets could also be “whistling previous the graveyard.”
Merely put, Bannister and Carroll say customers aren’t as wealthy as their account balances present, following the “cash phantasm” of COVID-era fiscal stimulus that they described as a “World Warfare–degree” effort.
With the mighty American client working out of breath amid an financial slowdown within the second half of 2025, Stifel sees a decline of 10% or extra within the S&P 500.
Actual financial ache is brewing
In accordance with Stifel, the obvious well being of the U.S. client belies an underlying slowdown, with private consumption—chargeable for 68% of GDP—exhibiting successfully 0% progress yr thus far. Their analysis highlights a number of purple flags.
They observe that progress in actual wage earnings, the primary driver of non-public consumption, has slowed to an annual price of simply 1% as stagflation hits.
As well as, financial and monetary insurance policies are in a “tug-of-war” that counteract one another, leading to a minimal increase to client spending.
And in contrast to in 2022–23, there’s considerably much less client financial savings to help consumption.
About that cash phantasm: Stifel’s knowledge exhibits that from September 2019 to March 2022, family money balances elevated 44%, whereas client spending doubled towards the historic median. Bannister and Carroll argue that the phantasm stored spending afloat and helped drive asset costs upward, but it surely’s now fading after the “helicopter dump” of money within the early 2020s.
The inform right here, they are saying, is that financial savings charges have come again into stability with fairness internet price, after a interval when extra cash moved first by means of consumption, then belongings. Put one other method, America is actually cash-poor.
What’s extra, Stifel’s calculation exhibits that the non-public financial savings price has fallen dramatically since COVID, so People have binged on spending and now have much less money readily available than within the years earlier than the pandemic.
The analysts warn that this exhibits the bogus increase has waned and there’s no obvious new supply of family spending energy, amid persistent fiscal deficits and tariffs.
Financial institution of America Analysis has likewise cited tariffs because it maintained its name for stagflation as a substitute of recession.
Correction coming?
The Federal Reserve has been left in a “too late” posture from stagflation, as the speed cuts that Trump retains calling for can’t save an “overvalued” S&P 500, with inflation proving sticky and provide constrained within the financial system.
Whereas the capex growth round AI briefly helps GDP and asset costs, Stifel forecasts this bump will fade as company tech spending plateaus. Such a build-out, in spite of everything, happens solely as soon as, whereas client spending energy is coming into a lull that would expose markets to abrupt correction, they write.
Valuations have ballooned. Stifel notes the S&P 500 hit 6,375 and the Nasdaq 100 reached 23,587 earlier this month. But historical past exhibits that momentum can activate a dime. “Valuation doesn’t matter till it does,” the analysts warn, citing the Nice Melancholy of 1929, the dotcom growth of 1999, and the post-COVID ambiance of 2021. They forecast a greater than 10% selloff beckoning for the S&P 500.
A proof for a ‘bizarre’ feeling?
Stifel’s bearish prediction, echoing Financial institution of America, could supply a proof for a “bizarre” feeling permeating the financial system. Nick Maggiulli, COO of Ritholtz Wealth Administration and creator of the New York Instances bestseller The Wealth Ladder, beforehand spoke to Fortune concerning the odd state of the financial system in 2025 and concluded that “one thing bizarre’s happening.”
Maggiulli, whose e-book focuses on what his analysis signifies concerning the rising six financial lessons of the U.S., stated “the financial system wasn’t constructed to deal with this many individuals with this a lot cash.” He cited knowledge exhibiting that the higher center class, with family internet worths between $1 million and $10 million, have ballooned from simply 7% of the nation in 1989 to 18% as of 2022–23, with a lot of this run-up in wealth occurring for the reason that pandemic.
UBS International Wealth Administration has equally documented a dramatic rise within the “on a regular basis millionaire,” with a fourfold improve on a world foundation for the reason that begin of the twenty first century. Even after adjusting for inflation, their quantity has greater than doubled in actual phrases since 2000. “There’s a very good portion of [everyday millionaires] that really feel like they don’t have sufficient,” Maggiulli informed Fortune, “they usually really feel like they’re simply getting by, though statistically they’re within the prime 20% of U.S. households.”
