Stifel said in a note Tuesday that the market is set to broaden, and value stock will rally relative to demonstrably over-valued growth.
The setup is similar to the first half of 1999 during the late stage of the prior (latter 1990s) Tech Bubble, with resilient economic growth, especially for the US, sticky inflation, and a cautious Fed, explained analysts.
"A solid U.S. economy and bottoming abroad, combined with sticky inflation (CPI, Core PCE especially SuperCore PCE which is about half of PCE) may cause high-P/E ratio Growth stocks to top while broadening the S&P 500 rally," wrote the firm.
The firm highlighted an area where Bitcoin has "failed" every time since 2011 in terms of its Z score being above the polynomial trend. This is a useful measure of speculative froth, said analysts.
"Economic growth plus sticky inflation are more rewarding for 'Cyclical Value' (Banks, Cap Goods, Energy, Financial Services, Insurance, Materials, Real Estate and Transports), which should rally in 1H 2024 and perhaps well into summer 2024," added Stifel.
"This is all in context of a longer term, inflation-adjusted S&P 500 that we believe is likely about flat in 2034 versus 2024, with commodities a pivotal indicator of the equity direction."