Stocks won’t hit new highs anytime soon and 3 things mean the market is fairly valued, Wells Fargo says

• The S&P 500 is unlikely to hit new highs anytime soon, according to Wells Fargo.

• Strategists said a combination of headwinds could prevent further gains.

• The bank pointed to concerns surrounding a potential recession, artificial intelligence, and geopolitical uncertainty.

Wells Fargo said the stock market’s long winning streak may be over for now.

The bank’s strategists warned that stocks are unlikely to rise significantly in the coming months, and in their view the market is “fairly valued now.”

This is because three headwinds will limit gains in the S&P 500. The benchmark index is likely to face resistance at 5,670, the record high it hit earlier this summer.

Stocks continued to rise in August as investors gained more confidence about a soft landing and prepared for ambitious interest rate cuts from the Federal Reserve.

However, the bank said markets face greater uncertainty, citing geopolitical tensions in the Middle East, doubts about whether the economy can avoid recession, and concerns that the AI ​​drive may be losing momentum.

Stock markets are also heading into an election year, which historically means more volatility. Investors are weighing the uncertain political landscape, with presidential candidates Kamala Harris and Donald Trump still neck and neck in the latest polls.

“While we believe the S&P 500 remains in an uptrend, it now finds itself facing major resistance at an all-time high,” strategists said in a note on Monday. “For these reasons, we view the S&P 500 as unlikely to reach meaningful new highs in the coming months.”

While stocks may not see a rally to new highs anytime soon, there may be an opportunity for investors to adjust and reallocate their portfolios to “particularly unfavorable areas” – Unloved areas of the stock market could see huge gains in the coming years..

This includes emerging markets, as well as consumer discretionary, consumer staples, utilities, and real estate sectors in the United States.

Investors have tempered some of their enthusiasm for stocks since the start of the year, when high expectations for AI and the Federal Reserve’s monetary easing propelled the market to a series of record highs. Since then, growth concerns have overshadowed excitement about interest rate cuts, and questions about the sustainability of AI’s rise have dampened the tech’s rally.

In the latest survey of investor sentiment by the American Securities Institute, about 45% of investors said they feel optimistic about the stock market over the next six months, down from 51% of investors who felt that way about a month ago.

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