Wells Fargo is forecasting a broad-based rally in risk assets into the end of 2025, predicting multiple market tailwinds will align to push equities higher. The bank sees the S&P 500 reaching 7,100 by year-end, citing seasonal strength, AI-driven capital expenditure, fiscal catalysts, and consumer stimulus.
In a note led by Ohsung Kwon, analysts said they favor “junk, high beta, SMID AI capex, [and] reflation” trades, outlining five key drivers behind their bullish scenario.
1. Laggards bounce after October
The bank expects a seasonal rebound in underperforming stocks between November and January, noting that historically, “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. Accelerating AI capex
Wells Fargo anticipates another upside surprise from AI capital spending through 2026, as hyperscalers increase debt-funded investments.
“We’re in the fourth inning—the middle innings (4–6) will be marked by capex funded with debt,” analysts wrote, adding that hyperscalers have only financed 8% of their capex with borrowing so far, compared to higher levels in past investment cycles.
“Don’t underestimate the AI capex cycle,” Kwon’s team emphasized.
3. IEEPA ruling could spark reflation
The Supreme Court of the United States will hear challenges on November 5 to reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
“If repealed, tariffs collected under IEEPA will be subject to refund,” the analysts said, estimating up to $160 billion in potential refunds. Such an outcome, they added, could trigger a “reflation/fiscal concern trade.”
4. Consumer stimulus from OBBB
Wells Fargo projects the One Big Beautiful Bill (OBBB) package could provide $800–850 per tax filer, adding roughly 45 basis points to GDP growth. “We expect a reflation trade into the consumer stimulus,” the note said.
5. Market boost after government reopening
The analysts said a resolution to the current government shutdown in early November could spark another leg higher for stocks. Historically, the S&P 500 “rose 2.6% in the month after government reopen,” the note stated. They added that light economic data releases after reopening could further support equities — “no news has been good news for stocks.”
Overall, the bank’s view is that the combination of fiscal catalysts, seasonal strength, and accelerating AI investment creates a favorable backdrop for a broad rally across markets.