Wells Fargo's Darrell Cronk, Chief Investment Officer for Wealth & Investment Management, anticipates no Federal Reserve rate hikes in 2026. This outlook underscores the bank's recently elevated S&P 500 target range of 7,800-8,000 for year-end 2026, and an even higher target of 8,600-8,800 for 2027.
The investment bank also revised its earnings-per-share estimate for S&P 500 companies to $340 for 2026, an increase from their previous $315 projection. For 2027, the forecast rose to $390 from $365. This optimistic revision is based on expected corporate profit growth, especially driven by AI capital spending, rather than just market sentiment.
While Wells Fargo acknowledges that current valuations are elevated, with an implied forward multiple of roughly 23 times 2026 earnings, they believe durable multi-year profit growth will justify these levels. However, they flag inflation as the primary risk, and emphasize that their bullish case hinges on sustained AI investment and companies meeting upgraded earnings projections. A slowdown in AI spending could weaken this thesis, making the current valuation harder to defend in a market that has already seen over 10% growth this year.
