Christopher Harvey, of Wells Fargo Securities, is sticking to his extremely bullish target year-end for the S&P 500 Index. This would equate to an 11 percent gain over Friday’s closing price at 6,296.79.
Harvey attributes the equity gauge’s 27% rise since April to America’s biggest technology companies.
Harvey, speaking to Bloomberg Surveillance said: “We’re seeing the winners continuing to win.” The uber-caps have higher margins and are increasing their market share. AI is on a secular upward trend that will continue.
Harvey is confident that the tech sector, and in particular the companies at the forefront of AI, will continue to grow despite the volatility in markets earlier this year.
He also points out the “Magnificent 7” technology giants that have seen a 42% increase in their stock price since President Trump suspended a few tariffs on April 9.
Five stocks, Nvidia (Nvidia), Microsoft, Apple (Apple), Amazon and Meta (Meta), now make up more than 25% of the performance.
The fundamental difference between S&P500 today and the S&P 500 of yesterday
Harvey argues that the index composition today provides resilience.
He said that “the S&P has changed since 25 years ago.” The benchmark now is much more robust, with stronger fundamentals, and more high-productivity, tech-focused companies.
Harvey stressed that the increasing concentration of index in just a handful of dominant companies insulates from macroeconomic weakness.
He said, “It’s much stronger today. The fundamentals are better than when I was a kid.”
He also credited better corporate management, and a strategic focus on the future as reasons to be optimistic.
The earnings season may reinforce bullish expectations.
Bloomberg Intelligence predicts that the Magnificent Seven will post combined Q2 profit increases of 14%, while the earnings for the rest of the S&P 500 should remain relatively unchanged.
This week Alphabet and Tesla, two of the lagging companies in the Big Tech group, will report, providing investors with a new look at the durability of the industry.
The rally could be extended by macro tailwinds
Harvey maintained a bullish outlook throughout the volatility of April, in stark contrast to other peers who cut their estimates amid uncertainty over trade and policies.
He bases his opinion on past experiences with Trump’s policy cycle. “We had seen Trump 1.0,” Harvey said. We know Trump’s style — he likes to leave the room and come back.
Harvey expects that the equity market will continue to experience tailwinds into 2025.
As supportive factors, he cites the expectation of a easing in monetary policy as well as a resilient consumer demand and an increase in M&A.
He said: “We think that the Fed will cut. The fundamentals look good, and the consumer’s situation is fine.”
Harvey is convinced that despite the risks, such as Trump’s policies on trade and the tensions between the Federal Reserve and the Federal Reserve Bank, the positives still outweigh any negatives.
Investors are increasingly confident about this future, as the S&P 500 has already hit multiple records since late June.
The post Wells Fargo’s bullish call on the S&P500, with big tech driving 11% rally could be updated as new information unfolds
