Sales Season and Upcoming Election: A Look Ahead to 2025, According to Wells Fargo
Wells Fargo strategists are advising investors to brace for increased market volatility as the selling season approaches, influenced by the upcoming election cycle.
Traditionally, the period from late summer to early fall has witnessed notable declines in the stock market. Over the last seven years, the S&P 500 has experienced sell-offs ranging from 5% to 20%, and the investment bank forecasts that this trend will likely persist into 2024.
The tightly contested U.S. election is expected to further amplify market uncertainty. According to the strategists, “An open election with an incumbent not seeking reelection, as is the case now, only serves to increase uncertainty.”
They anticipate that in the coming months, there will be fluctuations while stocks remain stagnant and struggle to achieve significant new highs.
Despite this volatility, Wells Fargo suggests that it could create opportunities for investors. They recommend having a “shopping list” ready in the event the market dips to recent lows, highlighting sectors like U.S. Large Cap Equities and specific segments including Communication Services, Energy, Financials, Industrials, and Materials within the S&P 500.
Additionally, the strategists believe that U.S. Small Cap Equities could also be an appealing option for those looking to add exposure near market lows, especially if their portfolio is currently underallocated in that area.
Conversely, they advise considering reductions in positions within overexposed sectors such as Consumer Discretionary, Consumer Staples, Real Estate, and Utilities if the market reaches recent highs.
Looking beyond 2024, Wells Fargo maintains a positive outlook. They predict that post-election, the economy will transition from its current slowdown to steady growth in 2025, driven by an earnings recovery and rising equity prices. Investors are encouraged to keep an eye on 2025 while making decisions in the upcoming months.
In a recent trading session, the S&P 500 experienced a modest gain, while the Nasdaq 100 faced a decline, affected by a drop in technology stocks. Investors are also evaluating the possibility of a larger-than-expected rate cut from the U.S. Federal Reserve later this week.
The S&P technology index, which has been the strongest among the 11 major S&P sectors this year, saw a 0.95% decline, making it the most significant loser of the session.