Freedom Broker Expects the U.S. Market to Shift Toward Selective Investing

Wells Fargo (WFC) cut its year-end 2026 target for the S&P 500 from 7,950 to 7,700 points. The new benchmark implies growth of about 1% from 7,619.98 points, where the index closed the previous trading session.

Wells Fargo is one of the largest banks in the U.S. It provides retail and corporate clients with banking, investment and insurance services and is also engaged in asset management. The company’s shares trade on the New York Stock Exchange under the ticker WFC.

Freedom Broker analyst Vladimir Chernov views the forecast revision as a sign of fading optimism in the U.S. market. It is becoming more important for investors to choose individual companies with clear sources of growth rather than count on a broad-based rise in the overall index.

What the S&P 500 index shows

The S&P 500 reflects the share-price performance of about 500 of the largest publicly traded U.S. companies across various industries. It is considered one of the key gauges of the state of the U.S. stock market.

Since the start of 2026, the index has risen by more than 11%. At the same time, Wells Fargo believes the market is approaching a late stage of the economic cycle, which is typically characterized by more restrained equity valuations and limited upside potential.

Wells Fargo’s revision was the first since the start of the Iranian crisis in which a major investment bank lowered, rather than raised, its outlook for the index. Other market participants, meanwhile, see the S&P 500 rising above 8,000 points by year-end.

Companies’ earnings forecast raised

Despite lowering its target level for the index, Wells Fargo improved its earnings forecast for companies included in the S&P 500. Its 2027 earnings-per-share estimate was raised from $395 to $425, and its 2028 estimate from $425 to $460.

Earnings per share indicates what portion of a company’s net profit is attributable to one of its securities. The metric helps assess a business’s financial performance and compare the valuations of different issuers’ shares.

In the second quarter, 85.7% of S&P 500 companies that reported results beat analysts’ expectations. However, Wells Fargo allows for weaker performance in 2028 if companies cut spending on artificial-intelligence infrastructure.

Previously, Freedom Broker reviewed the results of the largest U.S. market players and assessed how corporate performance could affect further stock movements.

Wells Fargo downgraded its view of the technology sector

The bank lowered its rating for the technology industry from “overweight” to “neutral.” This level means sector stocks may perform in line with the broader market, without notable outperformance.

According to Vladimir Chernov, the decision is negative for technology companies. An additional risk is growing political resistance to building data centers—complexes of servers and other equipment needed to store and process information, as well as to run artificial-intelligence systems.

Over three months, the number of restrictions and temporary bans on the construction of such facilities increased by 175%. If this trend continues, it could slow the rollout of new computing capacity and affect the expected revenues of equipment and infrastructure providers.

At the same time, certain technology-sector companies retain growth potential. The most resilient may be issuers that can demonstrate clear commercial returns from adopting artificial intelligence.

Healthcare may attract investors

Wells Fargo raised its rating for the healthcare sector from “neutral” to “overweight.” Such an outlook implies that industry stocks may outperform the broader index.

The sector may be supported by its defensive nature: demand for medicines, medical equipment and services typically depends less on the state of the economy. Another factor could be the outcome of the U.S. midterm elections.

If the Democratic Party wins, subsidies provided under the Affordable Care Act could be restored. These payments help citizens pay for health insurance and support demand for the services of insurers and healthcare companies.

Freedom Broker analysts’ broader view on U.S. equities, sector trends and risks is presented in the biweekly stock-market review.

In Vladimir Chernov’s view, the market is entering a period of heightened selectivity. In these conditions, investors should pay attention to individual growth stories with clear ways to generate income from artificial intelligence, as well as to defensive sectors.

Not an individual investment recommendation.