Wells Fargo Securities’ Chris Harvey recently raised his S&P 500 year-end price target by 20%, but he doesn’t feel bullish about the market’s direction. Despite his high target, Harvey believes the economy is in a period of malaise, with factors like interest rate cuts and market share shifts impacting stock performance. He expects mega-cap tech and growth companies to lead the market higher, even if economic conditions remain weak.
Harvey’s updated S&P 500 target for 2024 is 5,535, implying a 6% gain from current levels. He sees potential for growth in communication services and believes artificial intelligence is a secular story to watch. While Harvey acknowledges that stocks could grind higher, he suggests a balanced approach to investing, recommending an overweight position in communication services. He also believes that if rates go lower, utilities, small caps, and more levered companies could perform well.
In his interview on CNBC’s “Fast Money,” Harvey stated that he is not feeling particularly positive about the market despite raising his price target. He emphasized that the winners in the market, such as high-profit and high-growth companies, could continue to succeed even without a strong economy. Harvey’s S&P 500 year-end target for 2023 was 4,420, and the index ended the year up 24.2% at 4,769.83, exceeding his earlier expectations.
Despite the lack of bullish sentiment, Harvey believes that growth and momentum in large-cap stocks are likely to continue if the status quo remains. He points to potential market share shifts favoring successful companies and notes that a balanced investment strategy could help navigate uncertain market conditions. Harvey’s cautious optimism is rooted in the belief that certain sectors, such as communication services and artificial intelligence, offer growth opportunities even in a sluggish economy.
Overall, while Harvey has raised his price target for the S&P 500, he remains cautious about the market’s prospects, citing concerns about the economy and interest rate movements. He acknowledges that large-cap companies could benefit from market share gains, and recommends a balanced investment strategy that includes exposure to growth sectors. Despite his reservations, Harvey sees potential for gains in specific areas like communication services and artificial intelligence, highlighting the importance of staying agile in a rapidly evolving market environment.
