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Stay invested in the S&P 500: Wells Fargo

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In a note to clients Tuesday, analysts at Wells Fargo analysts advised staying invested in the S&P 500, despite the market’s strong performance so far in 2024.

The bank said it sees “potential upside based on both historical performance and our targets.”

The S&P 500 has gained over 10% year-to-date, nearing the upper limit of Wells Fargo’s 5100-5300 target range for 2024. However, they recommend staying invested for two key reasons.

Firstly, historically, the S&P 500 has performed well in election years and the year following. This year’s performance is “one of the best” at this point in the cycle, but “there is still upside suggested by the average indexed performance.” Furthermore, the past three election cycles saw even stronger performance.

Secondly, Wells Fargo has a higher target for the S&P 500 by the end of 2025 – a midpoint of 5700. This target, combined with the dividend yield, offers “an attractive return for investors from current levels.”

While above the historical average, their target aligns with strong performance seen in recent election cycles, which they expect to repeat in 2025 due to projected economic growth.

Wells Fargo encourages investors to avoid timing the market by holding cash. They believe reinvesting later is difficult and could lead to missing out on periods of strong performance.

The report concludes by suggesting some portfolio adjustments. Wells Fargo recommends trimming exposure to sectors that have outperformed or are rated unfavorably, while staying invested in US large-cap equities through the S&P 500.

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