Wells Fargo Investment Institute Identifies Five Pivot Points for the Markets

The WFII 2024 Midyear Outlook highlights economic and market forecasts, favored sectors, top portfolio ideas for the next 18 months

SAN FRANCISCO--(BUSINESS WIRE)--Wells Fargo Investment Institute (WFII) today released its “2024 Midyear Outlook: Approaching the Economy’s Pivot Point,” which explores WFII’s belief that the pivot to positive momentum at the start of 2024 was driven by the combined forces of artificial intelligence, anticipated Federal Reserve (Fed) rate cuts, declining inflation, and the resumption of durable earnings growth. WFII strategists remain confident that five key points will likely continue to chart the market’s path forward over the next 18 months.

1. Inflation — Consumer Price Index inflation has decreased from a high of 9.1% in June 2022 to a range of 3% – 4%. The U.S. economy is slowing this year and should further cool inflation and prompt Fed rate cuts. As we look out 18 months, our base case calls for inflation to drift mildly lower but struggle to land the Fed’s 2.0% to 2.5% target.
2. Interest rates — Coming into this year, markets anticipated as many as five or six interest rate cuts. Now at midyear, the market has shifted expectations and anticipates fewer 2024 Fed rate cuts and projects continued higher interest rates.
3. Liquidity — In the first half, we saw the effect of government stimulus packages and a ballooning federal budget deficit on asset prices as large amounts of liquidity were pumped into the economic engine. That led to all-time highs in the S&P 500 Index, Japan’s Nikkei 225 Index, Germany’s DAX Index, bitcoin, and gold. Even strong issuance of U.S. Treasuries and U.S. investment-grade corporate bonds was met with robust demand as liquidity actively searched for a home across all asset classes.
4. Earnings — Equity prices generally reflect expectations for future earnings growth, and there is the potential for more broad-based growth going forward. We expect earnings growth to support additional gains over the next 18 months for the major U.S. equity benchmark indices.
5. Global landscape — Possibly the greatest potential for a market-moving pivot comes on the world stage. The war in the Middle East has escalated, and the war in Ukraine continues. Also, slowing growth in China has been a headwind for emerging market equities, and the U.S. dollar has remained stronger for longer than most expected.

“As we recalibrate our outlook for the back half of 2024, our guidance remains focused on high-quality investments in both equities and fixed income,” said Darrell Cronk, chief investment officer for Wells Fargo Wealth & Investment Management. “Quality investments have performed well — and we expect that will continue — as geopolitical risks, market volatility, and November elections will have much to say about the path for markets in the second half of the year.”

Highlights of WFII’s forecast include:

• The anticipated U.S. GDP (gross domestic product) growth target for 2024 year-end is 2.5%, and 2.1% for 2025.
• The target for U.S. consumer price inflation in 2024 and 2025 is 3%.
• The S&P 500 Index price target range is 5,100 – 5,300 for year-end 2024 and 5,600 – 5,800 for 2025.
• Two interest rate cuts are anticipated later this year and one again in 2025. The Federal funds rate forecast for 2024 is 4.75% – 5.00% and 4.50% – 4.75% in 2025.

The full report provides guidance for investors to help navigate the next 18 months, economic and market forecasts, where WFII sees opportunity, and five portfolio ideas. Also included are insights about equities, fixed income, real assets, and alternative investments. Please see the full report for detailed information.

Join the WFII 2024 Midyear Outlook call today, June 12 at 4:15 p.m. Eastern Time. Dial-in: 877-601-6604; Passcode: 71-306-44.

A summary of the WFII 2024 Midyear Outlook is available (PDF).

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Risk Disclosure

Forecasts and targets are based on certain assumptions and on our current views of market and economic conditions, which are subject to change.

All investing involves risks, including the possible loss of principal. There can be no assurance that any investment strategy will be successful and meet its investment objectives. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors, some of which may be unpredictable. Asset allocation and diversification do not guarantee investment returns or eliminate risk of loss.

Stock markets, especially foreign markets, are volatile. A stock’s value may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. International investing has additional risks including those associated with currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. These risks are heightened in emerging and frontier markets. Investments in fixed-income securities, are subject to market, interest rate, credit, liquidity, inflation, prepayment, extension, and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in a decline in the bond’s price.

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold, or sell securities. Do not use this report as the primary basis for investment decisions. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs, and investment time horizon.

About Wells Fargo Investment Institute

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a leading financial services company that has approximately $1.9 trillion in assets. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth & Investment Management. Wells Fargo ranked No. 47 on Fortune’s 2023 rankings of America’s largest corporations. In the communities we serve, the company focuses its social impact on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and a low-carbon economy. News, insights, and perspectives from Wells Fargo are also available at Wells Fargo Stories.

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News Release Category: WF-ERS