S&P 500 price target raised to 5830 at Wells Fargo

Wells Fargo strategist Chris Harvey: "Sell-the-News Is Over. Since our "sell-the-news" call at the October high, two things occurred: (1) the call became consensus; and (2) the SPX did trade down to its 50DMA on Monday, a level we had anticipated (-2.5% from the high). "Pain Trade" Is a Rotation. This year many outperforming portfolios have been aligned with Growth and Price Momentum factors. A broadening out of the market and a move down cap will be a challenge to many active managers — as it was back in July. Buy the Election. In the late summer/early fall we advised investors not to "sell the first rate cut," but rather "buy the election" as 12mo returns following the last six presidential elections and the last six easing cycles have seen median and average returns for the major indices in the double digits. Also, in our view we have under-appreciated economic growth, a solid earnings season (SPX Q3 to date: EPS 6.6% and sales 1.5% above consensus), tight credit spreads, and positive momentum. Move Down Cap as Market Broadens Out. What benefits smaller caps and broader market participation is under-appreciated economic growth, a Fed easing cycle, oversold technicals, an improving regulatory environment, and a solid earnings season. Our best longer-term risk/reward is midcap growth. Sectors. We have an overweight on the Banks, and would buy on strength as the regulatory change with a new administration is expected to support group multiples and earnings. Our favorite sector for the last two years, Communication Services, probably will trade with the market (or lag somewhat) in the near term as high-momentum sectors/ stocks adjust to a shifting status quo. We still like Comm Services for the longer term. Trade and tariffs will be front-and-center for some time. While tariff concerns will be an issue, China's share of US imports fell from 22% in 2017 to 14% in 2023. We think the administration would be better served (and the narrative more relatable) if it just said that there is a fee for selling goods in our marketplace — not unlike the fee sellers pay to Amazon, AirBnB, Ebay, equity exchanges, etc. We note that a universal fee/tariff couldrequire Congressional approval."

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