Stifel’s Barry Bannister: “The Train is Approaching Crazy Town”
Barry Bannister, one of Wall Street’s few remaining bears, cautioned on Thursday that the S&P 500 is nearing “mania” territory, with stocks increasingly overpriced. This setup, according to Bannister, could lead to a rapid ascent in the short term, but also poses a risk of a painful pullback.
Bannister, Stifel’s chief equity strategist, noted in his report titled, “This is your conductor … the train is approaching Crazy Town,” that even in the best-case scenario of a U.S. soft landing, several factors—higher U.S. fiscal spending, China’s cyclical stimulus, and intensifying geopolitical risks—are pushing the S&P 500 to unsustainable heights. The index is now approaching a valuation high not seen in over 80 years.
Currently, with the S&P 500 closing above 5,970, Bannister believes the fair value should be closer to 5,250. He suggests the index is overvalued by roughly five multiples when adjusted for financial conditions and the cyclically adjusted price-to-earnings (CAPE) ratio.
Drawing on past market manias, Bannister foresees a possible climb to the low 6,000s for the S&P 500 this quarter, followed by a retraction toward fair value around 5,250 by early 2026.
He’s also monitoring the potential for inflation to rebound, noting that similar periods of inflation resurgence occurred from 1932-39, 1945-52, and 1967-74. Should this pattern repeat, it could spell significant risk for investors, particularly in the last year of Fed Chair Jerome Powell’s term (May 2025 to May 2026), when political pressures might be heightened by the 2026 U.S. midterm elections.
Bannister observed that the S&P 500’s rising price-to-earnings (P/E) ratio and the outperformance of growth stocks relative to value stocks both appear overstretched. “With political turbulence, potential reflation, and more fiscal populism, we may see growth versus value stocks adjust lower,” he said.
Historically, defensive stocks tend to outperform when economic growth slows. Bannister argues this environment now favors “defensive value” stocks, particularly in the healthcare, utilities, and consumer staples sectors, along with high-quality stocks.
