Wells Fargo supports the US stock market! Warns investors against being overly optimistic about emerging market stocks
Wells Fargo advises investors to reduce their holdings in emerging market stocks and instead invest in U.S. stocks. Although emerging markets have outperformed the S&P 500 index, the dollar is expected to strengthen, and tensions in U.S.-China relations may pose risks. Wells Fargo's investment strategist Austin Pickle pointed out that market sentiment towards emerging markets is overly optimistic, and while a global economic rebound is expected in 2025, emerging market returns will still lag behind the U.S. market
According to the Zhitong Finance APP, Wells Fargo believes that investors should reduce their holdings in emerging market stocks and instead buy U.S. stocks. The bank's investment strategist, Austin Pickle, stated in a report that although emerging economies have outperformed the S&P 500 index this year, the outperformance of emerging markets is typically associated with a weakening dollar. He predicts that the dollar will strengthen and warns of risks arising from tensions in U.S.-China relations.
Austin Pickle said, "The market's sentiment towards emerging markets has become overly optimistic." "We expect the global economy to rebound later in 2025, and many trade-related issues will eventually be resolved, which will drive up emerging market prices, but their returns will still lag behind the U.S. market."
Austin Pickle pointed out, "(Investors) may consider investing in large-cap stocks, mid-cap stocks, or other developed market stocks in the U.S." He noted that developed economies "have a more stable and predictable regulatory environment, and recent news of increased fiscal spending in Europe may continue to provide positive momentum."
Wells Fargo's view sharply contrasts with other institutions on Wall Street, such as Morgan Stanley Investment Management, Bank of America, and JP Morgan, which believe that emerging market stocks may finally be seeing a turnaround. A weak dollar and the questioning of the safe-haven status of U.S. Treasuries are considered factors driving the recovery of emerging market stocks
