Wells Fargo adjusts its S&P 500 sector recommendations

Investing.com -- Wells Fargo has raised its U.S. growth and earnings forecasts and adjusted its sector calls, shifting preference toward Industrials, Financials, and Utilities while reducing exposure to Communications Services and Health Care.

The bank said in a note that “the consensus economic growth estimates for the U.S. in the quarters and year ahead have been moving higher in recent weeks.”

It added that tariff impacts have been “less than what many had predicted” and that the labor market is “holding in better than expected.” Consumer spending has also been more resilient than anticipated.

Wells Fargo now expects U.S. economic growth of 2% this year, up from 1.3%, and 2.4% in 2026, versus a prior forecast of 1.5%. Earnings estimates for the S&P 500 have also been raised, with the bank forecasting $270 for 2025 and $300 for 2026, compared with earlier projections of $265 and $290.

“As this year ends and we move into and through 2026, we expect to see earnings and stock performance broaden to some extent beyond the seven stocks whose growth rates and stock performance have largely carried the SPX to a series of record highs,” Wells Fargo said.

From a sector view, Wells Fargo said its “most favored Financials sector should benefit from a steeper yield curve, regulatory reforms, and more mergers and acquisitions,” while Utilities are poised to gain from “the capital-expenditure boom directed at artificial intelligence as demand for electricity surges.”

By contrast, the bank said it is trimming risk in Communications Services and Health Care, sectors it now rates neutral and unfavorable, respectively.

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