The S&P 500 (SP500)(IVV) will correct 10% by the end of the third quarter as persistent inflation keeps the Federal Reserve from cutting interest rates in 2024, Stifel forecast on Tuesday.

Stifel stated that his model points to the main PCE, i.e. the Fed the preferred measure of inflation, will escalate slightly in the second half of the year, delaying the start of the Fed’s monetary easing cycle. Basic PCE in April increased by 2.8% y/y, remaining stable since March. He sees bland growth in the economy. S&P500 (SP500)(SPY) was around 5,279 on Tuesday. It hit a record high of above 5,300 last month.

Investors should consider investing in defensive value industries such as health care, consumer staples and utilities, Barry Bannister, chief equity strategist at Stifel, said in a note.

“We detect a dichotomy between the actual performance of the S&P 500 over the last 2.5 years and investor enthusiasm,” Bannister said. The inflation-adjusted S&P 500 Index (SP500)(VOO) is slightly below its December 2021 inflation-adjusted high, creating a path to transition from secular bull market to secular bull market, he said.

A secular bull market requires the equity benchmark to consistently make higher, inflation-adjusted highs, and the transition period is “a much more treacherous period for investors, particularly in buy-and-hold,” Bannister said.

The top five stocks on the list of 50 defensive stocks with buy ratings are Costco Wholesale (COST), Abbott Laboratories (ABT), Philip Morris International (PM), Intuitive Surgical (ISRG), and Stryker (SYK).