Wells Fargo: The Market Is in for a "Rally Across the Board" This Summer

Wells Fargo raised its year-end 2026 target for the S&P 500 index from 7,300 to 7,950 points. The new target implies growth potential of approximately 5.8% relative to Tuesday’s, June 16, closing price. The bank’s analysts cited improved corporate earnings forecasts, a reduction in macroeconomic risks following the interim agreement between the U.S. and Iran, and a recovery in investor sentiment after the recent market downturn, Reuters reports.

"A broad market rally" awaits investors this summer, said Wells Fargo strategist Ocan Kwon, as quoted by CNBC. He believes the rally will extend not only to companies involved in artificial intelligence but also to those segments of the stock market that have so far benefited very little from the AI boom. According to the analyst, the easing of macroeconomic risks following the deal between the U.S. and Iran should lead to a shift of capital from defensive sectors to cyclical sectors of the economy.

At the same time, AI will remain one of the main drivers. “Investor sentiment has rebounded, creating room for further growth in the AI sector. The race among the largest cloud companies to raise capital also remains a powerful driver for chipmakers and infrastructure companies,” Kwon wrote.

The analyst considers inflation to be the key risk for the market, but only in the event of a hawkish response from the U.S. Federal Reserve. He suggested a scenario in which the central bank would keep rates steady even in the face of rising inflation in order to support economic growth and reduce the debt burden. In that case, stocks will be the best hedge until the Fed begins to actively combat rising prices, according to the Wells Fargo strategist.

Goldman Sachs analysts, led by Lee Koppersmith, also predict a catch-up rally in undervalued cyclical stocks not related to AI, according to Bloomberg. They have observed signs of “fatigue” from the hype surrounding artificial intelligence and, at the same time, see potential for stocks that were previously weighed down by the blockade of the Strait of Hormuz. A basket of economically sensitive stocks from the S&P 500 index has risen 11% year-to-date through Friday, while the Nasdaq 100 technology index has gained 17% over the same period, Goldman noted.

At the same time, JPMorgan’s trading division warned that the “broad market rally” could lose steam after an initial rebound. The bank recommended that clients favor technology companies and maintain a tactical long position in the financial sector, according to Bloomberg.

This article was AI-translated and verified by a human editor