Wells Fargo warns of a 5-10% S&P 500 pullback as it downgrades technology stocks and highlights record-high investor equity allocations.
Wells Fargo cut its S&P 500 target to 7,700 from 7,950 and warned of 5%-10% near-term downside.
Wells Fargo downgraded technology to equal-weight from overweight.
Wells Fargo upgraded health care to overweight from equal-weight.
Wells Fargo identified appreciation in the South Korean won as a potential obstacle for memory semiconductor stocks.
Wells Fargo lowered its 2026 S&P 500 target to 7,700 from 7,950, warning of a potential 5% to 10% near-term correction. Analysts cited record-high equity allocations and contracting valuation multiples as primary risks, prompting a downgrade of the technology sector to equal-weight while upgrading health care to overweight.
The firm cites concerns over stretched equity valuations, record-high investor positioning, and declining liquidity conditions, which could lead to a 5% to 10% market correction.
The firm downgraded the technology sector to equal-weight from overweight and upgraded health care to overweight, favoring quality stocks over high-beta equities.