(Bloomberg) -- Barry Bannister was one of only a handful of Wall Street forecasters who correctly predicted this year’s US stock rally at the start of 2023. Now, the Stifel strategist says this is as good as it gets.

The S&P 500’s surge has taken many investors by surprise, exceeding even Bannister’s bullish forecast of 4,300 points by mid-year. While bets of an imminent end to interest-rate hikes have kept the gains going in July, Bannister predicts that inflation will be stickier than some are counting on.

“I would say there’s a decent risk of a January 2024 recession,” he said during a call on Thursday, predicting the S&P 500 will “level out” around 4,400 this year. “I think inflation is stuck with us for a while at a higher level than it used to be.”

Bannister’s call was contrarian at the start of 2023, when a majority of prognosticators fretted over a recession and predicted a rough first half followed by a second-half recovery on the back of the Federal Reserve’s pivot. Most ended up blindsided by the resilience of the US economy and profit growth, as well as by the artificial intelligence-driven rally in big tech stocks.

Read more: Wall Street Soothsayers Are Bewildered About What’s Next

The S&P 500 ended up rallying 16% in the first half of the year, the best return for the period since 2019. And while cooling inflation this week buoyed markets further, the outlook may be more challenging from here on: growing profit warnings and mixed data signal the worst of the economic damage may not be over.

Bannister is betting on sectors such as industrials, materials, financials and transport to outperform in the second half, shifting focus away from Big Tech.

While the US has so far avoided the recession feared by many in 2023, he sees it as a risk going into 2024, calling consensus earnings expectations next year too optimistic.

“What we are doing is betting on equal weight outperforming cap-weight S&P, and cyclical value outperforming cyclical growth,” Bannister said.

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