Stocks staged a strong rally Thursday, a day after the Federal Reserve’s aggressive start to cutting rates. But Wells Fargo cautioned that the pop is detached from reality. “Both stock and bond prices have rallied more than what we think the underlying fundamentals support,” Scott Wren, the bank’s senior global market strategist, said in a note to clients. “Valuations may not be extremely high but are certainly stretched in our view.” The central bank’s first reduction in years fueled hopes that the U.S. could skirt a recession while inflation is under control. However, the benefits of easing policy may not be truly felt until next year due to the uncertainty surrounding the presidential election, Wells said. .SPX YTD mountain S & P 500 “We have a presidential election less than seven weeks away and are in what is historically a weak period of the calendar year for equities,” Wren said. “We believe 2025 may offer investors an improving economy that is benefitting from Fed rate cuts.” The Wall Street bank said the S & P 500 is likely to be range bound in the coming months and it is already trading toward the top of the range. The equity benchmark hit another all-time high Thursday, pushing its 2024 gains to nearly 20%. Wells sees the S & P 500 finishing 2024 at 5,200, 7% below Wednesday’s closing level. Its target is one of the lowest forecasts among Wall Street strategists, who on average project the benchmark ending the year at 5,571, according to CNBC Pro’s market strategist survey.
