Will the market peak after reaching 6000 points? Strategist: US stocks may experience a 10% surge followed by a 20% plunge due to "mania"

According to Zhītōng Finance, Stifel, Nicolaus & Co., an American investment bank, stated that if past market enthusiasm can be used as a reference, the S&P 500 Index may rise by nearly 10% this year. However, the company's chief stock strategist Barry Bannister mentioned that just like previous "bubbles," this bubble will eventually burst. Bannister indicated that with investors pouring in continuously, the U.S. stock index could reach the 6,000-point mark by the end of 2024, slightly below 5,500 points on Thursday. However, he predicted that by mid-2026, the index would fall back to around 4,800 points, evaporating one-fifth of its market value.

It should be noted that this forecaster stated that risk assets, especially the stock market, will experience a correction earlier. He set the year-end target for the S&P 500 Index at 4,750 points, implying a drop of about 13% from today. Due to pressure on tech stocks, the index retreated slightly after hitting a historical high on Thursday. Nevertheless, he mentioned that investors' optimism has been driving the market for months, and this sentiment will boost the stock market before the final crash.

In a report to clients on Wednesday, Bannister and his team wrote, "Timing is everything, and we realize that investors may be in a full-blown bubble/frenzy mode, which seems to exceed our concerns."

The U.S. stock market has recently continued its bull market rally, with investors expecting signs of cooling inflation to lead to a Fed rate cut this year. This view, along with strong earnings and enthusiasm for AI-related companies, has driven the S&P 500 Index up by nearly 15% this year.

However, some on Wall Street have warned that the market is overbought, with power too concentrated, making the stock market fragile. Bloomberg's tracked strategists have an average year-end target of around 5,297 points, with the highest upper limit set by Evercore ISI at 6,000 points, and the lowest forecast by Morgan Stanley at 4,200 points.

Bannister believes that danger signals for the stock market come from the cryptocurrency sector. He mentioned that since the outbreak of the pandemic, Bitcoin has been closely related to the Nasdaq 100 Index, and with the decline in the cryptocurrency benchmark index this month, this serves as a warning signal for the U.S. stock market.

The strategist wrote, "The weakness in Bitcoin indicates that the S&P 500 Index is about to enter a summer adjustment and consolidation phase. We believe that with persistent high inflation, the Fed will change its current cautious dovish stance, further driving the correction of risk assets (specifically the stock market)." This forecaster correctly predicted the rebound in the stock market in the first half of 2023, while many analysts at the time were warning of a pullback triggered by a recession. However, after officially announcing a bullish view on the US stock market, he essentially stuck to a target, implying that further returns would weaken