Stifel: U.S. Economy Experiencing 'Overheated Expansion,' AI Investment Cycle Trumps Consumer Pressure

BlockBeats News, June 25th. Stifel, a large diversified financial services holding company in the United States, raised its year-end target for the S&P 500 and provided a stock allocation framework centered around a "high-growth, high-inflation" environment.

The firm raised its year-end target for the S&P 500 to 7,800 points, believing that the U.S. economy is entering a "running hot" phase, where economic growth is strengthening, and inflationary pressures are rising. Stifel's model shows that U.S. growth momentum is strengthening, and inflation momentum is also significantly overheated, which will change the market leadership structure in the second half of the year.

Stifel's favorites are not the traditional consumer sector but investment-oriented cyclical industries, including banks, transportation, materials, energy, semiconductors, software, and hardware. The firm believes that AI capital expenditures are still expanding, with large tech companies such as Amazon, Microsoft, Meta, and Google expected to have a combined capital expenditure of around $725 billion by 2026, higher than the previous estimate of about $100 billion.

This means that the AI investment chain may continue to outperform the consumption chain squeezed by inflation. Stifel recommends that investors reduce their reliance on consumer discretionary, consumer staples, communication services, and some financial services as these areas have weaker profit corrections. Instead, the firm prefers cyclical value stocks and hedges with defensive value sectors such as insurance, automotive, energy, and banking.