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Wells Fargo issues first outlook for 2018 from Wall Street and it's not bullish

Evelyn Cheng
CNBC

Wells Fargo Investment Institute doesn't expect the S&P 500 to rise more than 2% over the next 15 months, according to the firm's 2018 year-end outlook released Thursday.

Traders work on the floor of the New York Stock Exchange at the start of the trading day in New York, New York, USA, 15 September  2017.

While some Wall Street strategists have included 2018 S&P targets in their equities notes, the Wells Fargo note marks the first major outlook report for next year.

Wells Fargo gave a range of 2,450 to 2,550 for the S&P next year, a decline of 2.3% or a rise of nearly 1.7% from Wednesday's record close of 2,508.24. The S&P inched up to a record intraday Thursday.

"The synchronized global recovery that took hold in 2017 should gain in 2018, though restrained by ongoing global headwinds from high debt, slow labor recoveries overseas and political uncertainties around the world," Wells Fargo's global investment strategy team wrote in a Monday note that was distributed to the media Thursday.

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"We also anticipate that earnings gains will fuel moderately higher U.S. and international equity markets," the report said. The strategists added that since the U.S. economy is likely in the "final third" of expansion, investors must be particularly aware of risks.

In late August, Wells Fargo Investment Institute raised its 2017 year-end target range by 70 points to 2,300 to 2,400. At the time, the increase still forecast, at best, a roughly 1% decline for the S&P.

Among 15 strategists surveyed by CNBC last year, Wells Fargo Investment Institute's Scott Wren came the closest to predicting where the S&P would end the year, albeit at a range. The middle of his target range was 2,240, and the S&P ended 2016 at 2,238.83.

CNBC's Tom Franck contributed to this report.

 

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