Wells Fargo sees S&P 500 peaking above 5500

Wells Fargo advised investors to move away from the reflation trade, which has been a common strategy following GDP growth and Federal Reserve policy adjustments.

According to Wells Fargo, the period of significant upward revisions to GDP growth forecasts is likely over, as 2024 projections have almost doubled, reaching a level that no longer supports the reflation narrative. In the earnings season, Wells Fargo observes a trend where sectors with higher profitability, such as Information Technology and Communication Services, are increasing their contributions toThe broker anticipates this pattern to persist, indicating that a robust economy might not be necessary for strong EPS growth at the index level, which is a key factor in their S&P 500 target of 5535.It also noted that portfolio managers are typically penalized for inaccurate market predictions.

Wells Fargo concludes that the Federal Reserve's maintenance of the status quo has ironically supported the year-to-date performance of the S&P 500, creating favorable conditions for continued growth in trending mega-cap stocks.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.

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