S&P 500 Stuck In 4,600-4,800 Limbo For 2024? Wells Fargo Pinpoints 3 'Favored Sectors' For Next Year

The Wells Fargo WFC Investment Institute has released its 2024 Outlook, detailing their projections for market levels at the end of 2024 and highlighting their preferred sectors for the upcoming year.

S&P 500 Index target 4,600-4,800 in 2024

Per the report, Wells Fargo expects global earnings to be challenged in early 2024. They expect a rebound later in the year as the economy reaccelerates. Once investors begin to anticipate an economic and earnings recovery, they expect the S&P 500 to gain into the end of the year.

Wells Fargo has a 4.600-4,800 year-end 2024 target for the S&P 500 Index. Apart from the SPDR S&P 500 ETF SPY, the iShares Core S&P 500 ETF IVV and the Vanguard S&P 500 ETF VOO are two other popular ETFs that track the performance of the S&P 500.

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“Valuations likely will increase in 2024 as markets anticipate an earnings recovery into 2025” said Darrell L. Cronk, president of Well Fargo Investment Institute and the CIO of Wealth & Investment Institute.

Large-Caps Over Mid-Caps

At times when earnings per share (EPS) is decelerating and the economy is slowing, Wells Fargo favors quality and a more defensive posture within equities. Given their expectations with the earnings challenge in early 2024, Wells Fargo would prefer to allocate into U.S. large-caps over mid-caps and small-caps.

They have a year-end 2024 target for the MSCI EAFE Index of 2,000-2,200.

The MSCI EAFE Index follows the performance of large and mid-cap companies in 21 developed market countries globally, representing regions of Europe, Australasia, and the Far East. Notably, it excludes companies from Canada and the U.S. The iShares MSCI EAFE ETF EFA is a popular ETF that tracks the performance of the MSCI EAFE Index.

Analysts at the Well Fargo Investment Institute also prefer developed-market over emerging-market equities. Along with EFA ETF as mentioned above, the Vanguard FTSE Developed Markets ETF VEA and the iShares Core MSCI EAFE ETF IEFA are 2 other popular developed-markets equity-tracking ETFs.

3 ‘Favored Sectors’

In terms of sector picks, Cronk calls out Health Care, Industrials, and Materials as Wells Fargo’s “favored sectors.” Some popular exchange-traded funds tracking these sectors respectively are:

• Healthcare: The Health Care Select Sector SPDR ETF XLV and the Vanguard Health Care ETF VHT
• Industrials: The Industrial Select Sector SPDR ETF XLI and the iShares U.S. Aerospace & Defense ETF ITA
• Materials: The VanEck Gold Miners ETF GLD and the Materials Select Sector SPDR ETF XLB

Consumer Discretionary and Real Estate count among the unfavorable sectors.

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