Wells Fargo Predicts S&P 500 Could Revisit Lows Amid Market Uncertainty and Volatility

S&P 500 Forecast Points to Further Downside Risk

The S&P 500 index may be poised to retest its recent lows, according to a warning from Wells Fargo's top strategist, as persistent economic and policy headwinds continue to rattle investors. Ongoing trade tensions, geopolitical uncertainty, and U.S. fiscal policy debates are creating a challenging environment for equity markets.

After dipping by 20% from its intraday high of 6,144 in mid-February, the S&P 500 has staged a partial recovery, yet remains around 10% below its peak.

Wells Fargo Market Outlook: Volatility Likely to Persist

Scott Wren, Senior Global Market Strategist at Wells Fargo Investment Institute, emphasised that the current pullback aligns with long-term historical norms. However, he noted that further stock market volatility is likely in the near term.

“We wouldn’t be surprised to see the S&P 500 retest its recent lows as macroeconomic uncertainties continue to weigh on sentiment,” Wren wrote in a market commentary released Wednesday.

Trading Range Expected – Catalysts Needed for Breakout

Wren expects the U.S. stock market to remain range-bound between 5,000 and 5,500 in the coming months. He said a meaningful catalyst — such as a major trade agreement with China or Europe — would be needed to drive a breakout to higher levels.

“Without a clear resolution on global trade issues or economic policy, upward momentum may remain limited,” he added.

Geopolitical Risks and U.S. Fiscal Policy Add to Investor Caution

The note also pointed to U.S. fiscal policy challenges as a growing source of market risk. Debates over whether to extend the Trump-era tax cuts and raise the federal debt ceiling are underway in Congress, but face political hurdles due to a divided government.

With budget deadlines approaching in May, Wren warned that prolonged negotiations could further contribute to market instability.

Investment Strategy: Focus on Quality and Resilience

In light of ongoing volatility and uncertainty, Wren is advising investors to prioritise portfolio quality. He recommends allocating capital towards large-cap and mid-cap U.S. equities, particularly in sectors with strong fundamentals.

His top sector picks include:

• Information Technology

• Communication Services

• Financials

• Energy

These areas, he noted, offer solid balance sheets and strong cash flow, making them more resilient during periods of market stress.

(Sources: investing.com, reuters.com)