Wells Fargo Lowers S&P 500 Target to 7,700

Chief Equity Strategist Ohsung Kwon of Wells Fargo lowered the year-end target for the S&P 500 Index from 7,950 to 7,700 on Monday. Kwon warned that the stock market is entering the late stages of its cycle and faces a 5-10% downside risk as earnings momentum matures. He noted that current equity allocations stand at 72%, the highest level since 1969, which he considers excessive while 10-year Treasury yields reach 19-year highs.

As part of the revised outlook, Wells Fargo shifted its technology sector preference from overweight to equal weight, while raising health care to overweight. Kwon identified specific risks for the technology sector, including political resistance to data-center projects and the potential impact of the November midterm elections. Within tech, the bank now favors software over semiconductors, citing currency pressure on the Korean won.

Bank of America strategist Savita Subramanian echoed these concerns, stating the market is overdue for a pullback after experiencing only one 5% decline this year. Despite the lowered index target, Wells Fargo raised its long-term earnings estimates to $425 for 2027 and $460 for 2028, though Kwon suggested that weaker valuation multiples may offset this profit growth.