Wells Fargo is bullish on four S&P 500 sectors after a stock market correction driven by risk sentiment and geopolitics.
In a new investment strategy remarkWells Fargo says it “favors” stocks in the information technology (IT), industrials and utilities sectors.
Wells Fargo says it also recommends financial services, a sector that comprises nearly a third of the portfolio of Warren Buffett-associated investment conglomerate Berkshire Hathaway. Currently Berkshire Hathaway possess Bank of America, American Express, Visa, Mastercard and Ally Financial, which together make up about 30% of the investing conglomerate’s public equity portfolio.
As for the IT sector, Wells Fargo expects profits and revenues to grow, supported by “AI-related investments and follow-on investments.” Wells Fargo also says defense-exposed industrial stocks will benefit from higher spending amid rising geopolitical risks.
However, Wells Fargo is bearish on the energy, healthcare and consumer-facing sectors, saying investments in these stocks can be used as a “funding source” to invest in financial services, IT, utilities and industrials.
In the case of the energy sector, Wells Fargo says:
“We continue to see risks to oil prices through the end of the year and believe the recent outperformance could provide attractive opportunities to take profits and underweight energy exposure.
Our updated crude targets are $10 higher than before but are still almost 30% lower than current prices, reflecting our expectations of a continued geopolitical risk premium to prevent prices from falling to pre-war levels.”
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