Investing.com -- Wells Fargo projects a positive outlook for equities in 2025, driven by robust earnings growth and a supportive economic environment.
According to the bank, "increasing economic growth will drive company sales while deregulation, continued cost control, and loosening credit conditions should support expanding profit margins in 2025."
The bank expects equity prices to continue rising. “We expect equity prices to continue to march higher, driven primarily by earnings growth that broadens to more cyclically oriented areas of the market,” Wells Fargo (NYSE:WFC) stated.
The bank’s year-end 2025 S&P 500 Index earnings per share target is $275, with a price target range of 6500 to 6700.
The firm notes that the forecast for higher equity prices is consistent with historical patterns during Fed easing cycles.
"Of the four easing-cycle cases absent a recession since 1980, the average S&P 500 Index return 12 months following the first cut was over 22%, with the single worst return still an impressive 16%," Wells Fargo said.
In terms of positioning, Wells Fargo remains tilted toward quality, favoring U.S. Large Cap Equities over Mid-Cap and Small Cap Equities. Internationally, the preference is for Developed Market Ex-U.S. over Emerging Markets.
Sector-wise, Wells Fargo suggests a focus on cyclical and growth-oriented sectors over defensive ones.
The bank holds a "most favorable" ranking on Energy and "favorable" rankings on Communication Services, Financials, and Industrials. Conversely, Consumer Staples and Utilities are viewed unfavorably.