Wells Fargo calls for an 'everything rally' into year-end

Investing.com -- Wells Fargo calls for an “everything rally” into year-end, forecasting broad gains across risk assets as several market tailwinds align.

The bank expects the S&P 500 to reach 7100 by the end of 2025, supported by seasonality, AI-driven investment, policy catalysts, and consumer stimulus.

Analysts led by Ohsung Kwon said they favor “junk, high beta, SMID AI capex, [and] reflation” trades, citing five key drivers behind their bullish setup.

1) ‘Laggards bounce in Nov–Jan:’ Seasonality turns favorable after October’s tax-loss harvesting, particularly for underperformers, analysts said.

They noted that “stocks that lagged the most in Jan–Oct outperformed the S&P 500 by 3.9ppt in Nov–Jan on average (66% hit rate).”

2) ‘AI capex: get ready for another upside surprise:’ The analysts expect hyperscaler spending to accelerate through 2026, underpinned by debt-funded investment.

“We’re in the fourth inning—the middle innings (4–6) will be marked by capex funded with debt,” they wrote, pointing out that hyperscalers have so far financed only 8% of their capex with borrowing, well below prior investment cycles.

“Don’t underestimate the AI capex cycle,” Kwon and his team emphasized.

3) ‘IEEPA ruling: potential reflation event ahead:’ The Supreme Court is set to hear challenges to reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA) on Nov. 5.

“If repealed, tariffs collected under IEEPA will be subject to refund,” analysts said, estimating potential refunds of up to $160 billion. The bank expects a “reflation/fiscal concern trade” if the ruling goes against the administration.

4) ‘OBBB tax return:’ Wells Fargo projects the One Big Beautiful Bill (OBBB) package could add $800–850 per tax filer, providing a roughly 45bp GDP tailwind.

“We expect a reflation trade into the consumer stimulus,” analysts said.

5) ‘Government reopen:’ Lastly, if the ongoing shutdown ends in early November, it would mark the longest in history.
Historically, the S&P 500 “rose 2.6% in the month after government reopen,” according to the note. Even after reopening, data releases may remain light—“no news has been good news for stocks,” the analysts added.

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