Key facts
- Wells Fargo lowered its year-end target for the S&P 500 index to 7,700 from 7,950.
- Wells Fargo cited limited catalysts for further gains and rising political and sector-specific risks.
- The bank believes the market is entering the "late innings" of the cycle, supporting lower valuation multiples.
- Wells Fargo raised its 2027 earnings-per-share estimate for S&P 500 companies to $425 from $395.
- Wells Fargo raised its 2028 earnings-per-share estimate for S&P 500 companies to $460 from $425.
- Wells Fargo cut its stance on the U.S. technology sector to "equal weight" from "overweight" and upgraded healthcare to "overweight".
Wells Fargo has trimmed its year-end target for the S&P 500 index to 7,700 from 7,950, citing a market entering its "late innings" with limited catalysts for further gains and increasing political and sector-specific risks. The bank also raised its earnings-per-share estimates for S&P 500 companies for 2027 and 2028, while cautioning about potential downside risks to 2028 earnings if AI infrastructure spending slows.
In a September 14 note, Wells Fargo stated that the current market phase typically supports lower valuation multiples. The revised target of 7,700 is approximately 1% above the index's last close of 7,619.98 points, but falls below projections from several peers that anticipate the index topping 8,000 by the end of 2026.
The benchmark index has seen an 11.3% increase this year, navigating volatility from Middle East tensions and concerns about persistent inflation potentially keeping the Federal Reserve hawkish. BofA Global Research also adjusted its year-end target upwards to 7,400, though it noted the market was entering a seasonally weak period and was due for a pullback.
Wells Fargo also revised its sector views, downgrading the U.S. technology sector to "equal weight" from "overweight" and upgrading healthcare to "overweight" from "equal weight." This move on technology followed a recent selloff and calls for a slowdown in AI development due to safety concerns. The bank highlighted potential risks to tech from midterms, particularly concerning political pushback against data centers.