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Wells Fargo trims S&P 500 forecast to 7700
Wells Fargo Bank has lowered its forecast for the S&P 500 index by the end of 2026 to 7,700 points from 7,950 points, warning of downside risks of 5% to 10% due to the market nearing the end of the economic cycle. Despite raising its earnings estimates for 2027 to $425 and for 2028 to $460, the bank expects valuation multiples to decline rather than increase. It has also adjusted sector weights, downgrading technology to a "neutral weight" and upgrading healthcare, noting that the rising value of the Korean won is hampering the trading of memory chips. The allocation to equities stands at 72%, the highest since 1969, with the 10-year bond yield approaching 5%. These data points suggest an unprecedented widening negative gap that could limit future stock returns in the coming years.
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