Economists at American banking giant Wells Fargo suddenly increased their S&P 500 target for the end of the year.
Wells Fargo is now to predict the S&P 500 will end the year at 7,950, up from its previous forecast of 7,300, an increase of almost 9%, Reuters reports.
The bank’s economists identify three key factors for the expected index rise: stronger corporate earnings, the interim US-Iran deal that eases macroeconomic risks, and a recent market pullback.
Wells Fargo says the recent market sell-off has cooled investor sentiment, paving the way for further upside potential.
“Sentiment has reset, leaving room for upside in AI trading. Hyperscalers’ race to raise capital is also a big tailwind for semis and infrastructure.”
In a note to investors, the brokerage raised this year’s forecast for the S&P 500’s earnings per share (EPS) from $315 to $340, an increase of nearly 8%. Wells Fargo also increased its 2027 earnings per share from $365 to $390.
The economists say the significant risk in the market outlook is the general increase in 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 respond. A potential ‘run it hot, inflate out’ policy is bullish, and we expect stocks to be the best inflation hedge against that backdrop.”
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