Wells Fargo Remains Bullish on Equity Markets Despite Fed Uncertainty
Wells Fargo is maintaining its optimism about the equity markets, despite the uncertainty stemming from the Federal Reserve’s policy shift. The bank projects a double-digit return for 2025, setting a year-end target of 7,007, following an expected consolidation to 5,830 in 2024.
The bank acknowledges the challenges posed by the Fed’s decisions, including a 25-basis-point cut in December, which analysts described as “a close call.” However, it notes that the outlook for 2025 remains robust, supported by an “improving regulatory environment” and “good fundamentals.”
Wells Fargo anticipates “solid growth,” with GDP forecasts rising in 2025 and inflation not being driven meaningfully higher by tariffs. The bank also expects the Fed to continue easing and the regulatory environment to improve, supporting its bullish view on equity markets.
The bank’s strategy is centered on a sector “barbell,” allocating 40% to Communication Services, 40% to Industrials, and 20% to Staples, which it argues offers an attractive balance of “upside participation and downside protection.” This allocation is expected to perform modestly better than the broader S&P 500 during recent market turbulence.
Despite acknowledging near-term challenges, Wells Fargo sees opportunity ahead. The bank concludes that its sector barbell offers an attractive return distribution, and the combination of economic growth and improved fundamentals supports its bullish view on equity markets in the coming year.