Economists at the US banking giant Wells Fargo are suddenly hiking their year-end S&P 500 target.
Wells Fargo is now forecasting the S&P 500 will close out the year at 7,950, up from its previous prediction of 7,300, a nearly 9% increase, reports Reuters.
The bank’s economists site three main factors for the index hike forecast: stronger corporate earnings, the U.S.-Iran interim deal easing macroeconomic risks and a recent market pullback.
Wells Fargo says the recent sell-off in the market has cooled investor sentiment, setting the stage for further upside.
“Sentiment has reset, providing room for upside in the AI trade. Hyperscalers’ race to raise capital is also a big tailwind for semis and infra.”
In a note to investors, the brokerage increased this year’s prediction for the S&P 500 earnings per share (eps) to $340 from $315, a nearly 8% increase. Wells Fargo also raised its eps in 2027 to $390 from $365.
The economists say the significant risk in the market outlook is the general increase in the prices of goods and services.
Says Wells Fargo,
“We continue to see inflation as the biggest risk to stocks, but only if the Fed were to react. A potential ‘run it hot, inflate out’ policy is bullish, and we expect stocks will be the best inflation hedge in that backdrop.”
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