Following a stock market correction triggered by risk sentiment and geopolitics, Wells Fargo is bullish on four S&P 500 sectors. In a recent investment strategy note, Wells Fargo expressed favoritism towards stocks in the information technology (IT), industrials, and utilities sectors. Additionally, the financials sector is being recommended, which constitutes a significant portion of Berkshire Hathaway’s portfolio. Berkshire Hathaway currently owns Bank of America, American Express, Visa, Mastercard, and Ally Financial, making up approximately 30% of its public stock holdings.
Wells Fargo foresees growth in earnings and revenues in the IT sector, attributing it to AI-related investments and capital expenditure follow-through. The industrial stocks with defense exposure are expected to benefit from increased expenditure amidst rising geopolitical risks.
Conversely, Wells Fargo is bearish on the energy, healthcare, and consumer-oriented sectors. They suggest using investments in these areas as a “source of funding” to allocate towards financials, IT, utilities, and industrials.
Regarding the energy sector, Wells Fargo states, “We continue to see risks to the downside for oil prices through year-end and believe recent outperformance can provide attractive opportunities to take profits and underweight energy exposure. Our updated crude oil targets are $10 higher than previously but are still nearly 30% lower than current prices, reflecting our expectations for a lingering geopolitical risk premium to prevent prices from falling to pre-war levels.”
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