Wells Fargo says S&P 500 could retest lows amid growing headwinds

Investing.com -- The S&P 500 could revisit its recent lows amid persistent policy uncertainty and tariff-related market stress, Wells Fargo’s top strategist warned.

The index had briefly declined 20% from its mid-February intraday record of 6,144 before staging a partial recovery. The S&P 500 is still down approximately 10% from its peak.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, says that the pullback is consistent with historical averages, but warns that volatility may not be over.

“We wouldn’t be surprised if the SPX retested its lows as additional uncertainties create headwinds,” Wren said in a Wednesday note. Concerns over trade policy and the global growth outlook continue to weigh on investor sentiment.

Wren expects the market to remain in a broad trading range between 5,000 and 5,500 in the near term.

“It seems a catalyst will be needed to push the market noticeably higher,” he said, pointing to the possibility of a completed trade deal with Europe or China. However, such a breakthrough is likely to take time, as geopolitical maneuvering continues to cloud visibility.

“Meanwhile, U.S. and international leaders are posturing with moves and countermoves, which only leave investors with more questions,” Wren added.

The report also flagged U.S. fiscal policy debates as another potential source of turbulence. Legislative efforts to extend the Trump-era tax cuts and raise the debt ceiling are underway, but face hurdles due to narrow Republican majorities and broader political friction.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

This, Wren cautions, could add to market volatility, especially as key budget deadlines approach in May.

Amid these uncertainties, the strategist is advocating for quality across portfolios. He recommends U.S. large- and mid-cap equities and favors sectors with strong balance sheets and cash flow generation, such as Information Technology, Communication Services, Financials, and Energy.

“Our view is that quality allocations should help preserve wealth and offer better growth opportunities as uncertainties finally fade,” Wren concluded.

Should you invest $1,000 in WFC right now?

Don't miss out on the next big opportunity! Stay ahead of the curve with ProPicks AI – 6 model portfolios powered by AI stock picks with a stellar performance in 2024.

Unlock ProPicks to find out