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<\/p>\nAnother shock, followed by more Fed action, may be needed for stocks to push higher, says Stifel\u2019s Bannister<\/p>\n
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Published: May 1, 2020 at 10:49 a.m. ET, By William Watts<\/p>\n
Stock-market investors can thank the Federal Reserve\u2019s response to the COVID-19 pandemic for a relief rally that saw the S&P 500 briefly top the 2,950 level on Wednesday, but it might take another economic shock to prompt the sort of additional policy response that would allow equities to push further to the upside, according to one Wall Street analyst.<\/p>\n
\u201cTo coax the Fed to do ever more, we believe the market must first experience a deflation shock, such as another yield curve inversion in [the second quarter], to which the Fed would react,\u201d said Barry Bannister, chief institutional equity strategist at Stifel, in a Thursday note.<\/p>\n
Read: Is \u2018sell in May\u2019 in the coronavirus era a smart strategy?<\/a><\/p>\n Bannister, who acknowledged being initially \u201cblindsided\u201d by the pandemic, had called on March 19 for a stock-market rebound that would see the S&P 500 SPX rally back to 2,750 by April 30. On April 18, as the index hit that target, he raised his target to 2,950<\/a>, but warned that gains beyond that level could be difficult to come by.<\/p>\n Bannister said he had declined to raise his 2,950 target \u201cas we await a shock\u2026then the Fed.\u201d<\/p>\n Stocks traded at record highs in February, then tumbled into a bear market at breakneck speed as the COVID-19 pandemic resulted in the lockdown of the U.S. and economies around the world. Stocks set at least a near-term bottom on March 23, with the S&P 500 closing 33.9% below its Feb. 19 record. The S&P 500 ended Wednesday at 2,939.51, leaving it 13.2% below its Feb. 19 high.<\/p>\n
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