June 16 (Reuters) - Wells Fargo raised its year-end 2026 target for the S&P 500 to 7,950, pointing to stronger corporate earnings, easing macroeconomic risks following the U.S.-Iran interim deal and a recent market pullback that has reset investor sentiment.
The new target implies about 5.2% upside from Monday's close of 7,554.29.
The brokerage in a note dated June 15 said it now expects S&P 500 earnings per share for 2026 to rise to $340 from $315, reflecting robust profit momentum and continued strength in corporate fundamentals.
Wells Fargo also lifted its 2027 EPS target for S&P 500 to $390 from $365.
It added that geopolitical tensions have eased after the Iran agreement, helping reduce macro uncertainty that had weighed on markets.
"We continue to see inflation as the biggest risk to stocks, but only if the Fed were to react. A potential "run it hot, inflate out" policy is bullish, and we expect stocks will be the best inflation hedge in that backdrop" the brokerage said.
The S&P 500 (.SPX), is up 10.3% so far this year, broadly driven by the AI-driven rally and developments around the Iran conflict.
The recent sell-off in equities has also cooled investor positioning, bringing sentiment back to 'neutral' levels and creating room for further gains, Wells Fargo said.
"Sentiment has reset, providing room for upside in the AI trade. Hyperscalers' race to raise capital is also a big tailwind for semis and infra" brokerage added.
The brokerage maintained a constructive view on risk assets in the near term, particularly in cyclical sectors and semiconductors, as fading macro headwinds and steady earnings growth continue to drive the rally.
Reporting by Rashika Singh in Bengaluru; Editing by Tasim Zahid and Shailesh Kuber
