Key facts
- Wells Fargo lowered its S&P 500 year-end target to 7,700, down from 7,950.
- The bank cited limited catalysts for further gains and rising political and sector-specific risks.
- Wells Fargo raised its 2027 earnings-per-share estimate for S&P 500 companies to $425 from $395.
- The bank also increased its 2028 earnings-per-share estimate to $460 from $425.
- Wells Fargo downgraded the U.S. technology sector to 'equal weight' from 'overweight'.
- Wells Fargo upgraded healthcare to 'overweight' from 'equal weight'.
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.
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. 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.
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.
Separately, Wells Fargo CFO Mike Santomassimo said at an investor conference on Tuesday that the bank expects loan growth in 2026 to be better than its previous forecast and signaled healthy spending and credit trends in the U.S. He noted that debt-to-income levels are good overall, the economy is expanding, and the bank is not seeing any deterioration in delinquency trends. Wells Fargo reported that average loans rose about 12% in the second quarter and previously forecast 2026 loan growth in the mid-single-digit percentage range. Santomassimo maintained the bank's full-year net interest income and expense forecasts, expecting net interest income of roughly $50 billion and expenses of about $55.7 billion.