Investors were preparing for a far more cautious Wall Street, with sticky inflation figures and a Fed that refused to give markets the rate-cut signal they wanted.
Wells Fargo just switched up that setup.
The bank just revamped its S&P 500 view for the rest of 2026, TheFly noted, citing healthier earnings momentum, stronger fundamentals, and renewed confidence in the AI-powered market rally.
Wall Street expected the Fed to open the door to rate cuts, but Wells Fargo instead cited profits, not policy easing, as the reason stocks continued climbing.
For context, according to the Associated Press, the S&P 500 last closed at 7,500.58 on June 18, up 1.1% on the day and 9.6% for 2026.
Over the past month, it has been basically flat, with Reuters reporting that the index closed at 7,519.12 on May 26. This means the S&P 500 has been slightly lower since then, despite several sharp swings in tech, AI, oil prices, and the Fed.
The implication is that the market’s next leg might now depend less on hopes of lower rates and more on whether earnings, AI spending, and tech leadership can continue to overpower inflation risk.
Wells Fargo raises S&P 500 forecast
Wells Fargo had previously become much more cautious, slashing its S&P 500 year-end target as inflation, geopolitical risk, and Fed uncertainty made the market’s rally tougher to defend.
However, the caution has now been reversed.
The bank bumped its year-end 2026 S&P 500 target to 7,950 from 7,300 and lifted its earnings forecast for the index.
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Wells Fargo expects S&P 500 companies to earn $340 per share in 2026, up from its prior estimate of $315. Its 2027 EPS forecast also moved higher, to $390 from $365.
In other words, Wells Fargo is looking at a far more durable earnings catalyst to drive the market to record highs.
It sees healthier corporate profits and better fundamentals, along with easing macro risk and renewed AI-driven sentiment, now doing more of the work.
Investors felt that only Fed rate cuts could move the markets in a big way, but Wells Fargo’s new claim dispels that concern.
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Big-bank S&P 500 targets show Wall Street still expects 2026 upside
- Citigroup: 8,100. Citi raised its year-end S&P 500 target to 7,700, Barron’s noted, with Scott Chronert pointing to stronger earnings expectations and AI-driven profit momentum.
- Goldman Sachs: 8,000. Goldman lifted its year-end target from 7,600, citing stronger earnings growth, AI infrastructure spending, and a 2026 EPS forecast of $340.
- Morgan Stanley: 8,000. Morgan Stanley’s latest 2026 target sits at 8,000, backed by AI investment strength and earnings optimism, according to Reuters’ broking-target roundup.
- JPMorgan: 7,600. JPMorgan raised its target to 7,200, citing stronger EPS expectations and AI momentum as the primary drivers.
- Bank of America: 7,100. BofA remains one of the more cautious big-bank calls, with the firm flagging red flags around valuation, liquidity, and a market that may need earnings rather than multiple expansion to move higher, according to Investing.com.
AI, tech, and the Fed: the real test for the target
Wells Fargo’s higher S&P 500 target is contingent on the AI trade translating into real earnings, not just higher valuations.
Despite the choppiness, the bank’s argument is that AI sentiment has reset, leaving greater room for upside as hyperscalers continue to spend on chips, data centers, and infrastructure.
For context, the AI buildout is feeding demand across chips, networking, power, cooling, industrial equipment, and utilities.
That is also why the Wells Fargo Investment Institute advises investors to look beyond traditional information technology.
It sees AI-linked opportunities, offering opportunities in industrials, utilities, and materials. Naturally, a broader AI trade makes the market rally feel much healthier, as the S&P 500 would be a lot less dependent on a small group of mega-cap tech stocks.
To expand on that point, I recently covered Goldman Sachs, believing earnings are critical, as higher real rates and a higher cost of capital could limit how far valuations can expand.
According to reporting from Motley Fool, the Magnificent 7 still make up nearly one-third of the S&P 500, putting the combined S&P 500 weight at 33.8% as of early June 2026.
That said, the Fed is the main risk to that setup.
The index can support a higher target if earnings continue to rise, but higher interest rates make expensive growth stocks harder to defend.
If the Fed remains cautious about inflation, investors will likely demand greater evidence that AI spending is translating into profits, not just revenue growth or capex headlines.
For investors, the takeaway is not to abandon the AI trade but to be more selective inside it. So the cleaner opportunity may be in companies tied to actual AI infrastructure spending, pricing power, and earnings revisions, rather than stocks moving only on theme-driven momentum.
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