Wells Fargo analysts are urging investors to be selective in their equity investments, advising them to ‘buy stocks, not the stock market’.
The guidance comes as the S&P 500 (SPX) faces a slight decline, with the index down 0.5% for the week, but still up 12% year-to-date. Despite Monday’s 3% sell-off, market sentiment improved as good jobless claims data helped counter fears of a severe recession.
Wells Fargo analysts remain cautious about the broader market, citing “traditional pre-Fed trends” and the lack of immediate catalysts as reasons for their watered outlook.
They maintain the SPX year-end target at 5535, which means a modest rise of 4% from current levels. However, they do not recommend a large-scale buying strategy at the moment, due to this week’s events and ongoing uncertainties.
Best nominations from Wells FargoInstead
Wells Fargo sees specific opportunities, particularly in the telecom services sector, which saw a 9% decline.
THEY HIGHLIGHT STOCKS LIKE META, GOOGLE AND NETFLX AS ATTRACTIVE CHOICES THAT APPEAR ON THEIR MOMENTUM SCREENS.
Analysts also note that momentum stocks in July had a tough momentum but are starting to rebound. They expect ‘Quants, Growth, and Opportunistic Stocks’ to start adding to the names with positive price momentum that are currently ‘on sale’.
Finally, Wells Fargo points to the poor performance of the Russell 2000 index, calling it ‘one of the best short sellers’. They note that many small-cap ‘meme stocks’ have seen significant declines after their initial rally, a trend consistent with previous reconfigurations of the Meta index.
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