Wells Fargo has lowered its year-end S&P 500 price target from 7,950 to 7,700, implying only about 1% upside from current levels. The call was made on September 14 by the bank’s chief equity strategist Ohsung Kwon. The S&P 500 closed Monday near 7,620, leaving the index up about 11% for the year.
Kwon said the market is entering the late stage of its growth cycle, a period that typically brings multiple compression. Wells Fargo still raised its earnings forecasts, projecting S&P 500 companies will earn $425 per share in 2027 and $460 in 2028. However, the bank warned that 2027 earnings estimates are already about 42% above the historical trend line for this point in the economic cycle, the widest gap since the 1950s.
Wells Fargo also cut its rating on tech stocks from overweight to equal-weight, citing AI capital-spending slowdown risks and mounting political pressure on data centers. The bank noted that active data center moratoriums rose 175% nationally over the last three months, with further headwinds possible if Democrats sweep the midterm elections. Within tech, Wells Fargo said it prefers software over semiconductors and expects chipmakers to retest their July lows. The downgrade followed a broad tech selloff triggered by calls from AI industry leaders for a voluntary pause on some advanced development.
The bank upgraded healthcare from equal-weight to overweight, arguing that a Democratic election outcome could restore enhanced Affordable Care Act subsidies and benefit hospitals and exchange-levered health insurers. In contrast, Bank of America raised its year-end S&P 500 target from 7,100 to 7,400 but cautioned that markets are in a seasonally weak period. Wells Fargo also estimated equity allocations at 72%, the highest since 1969 and well above the roughly 60% its model suggests is appropriate, signaling increased market vulnerability heading into next year.
