Wells Fargo resets its S&P 500 target for rest of 2026 | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Wells Fargo has cut its year-end S&P 500 (SP500) price target to 7,300 from 7,800, pointing to risks it did not see coming when the year began.

The revision came from equity analyst Ohsung Kwon, who cited the ongoing U.S.-Iran war and lower-than-expected tax returns as the main drivers. The new target still implies roughly 12% upside from current levels. The S&P 500 is trading around 6,343, down about 7.7% year-to-date.

“We’re incorporating the emerging risk that wasn’t our base case heading into the year,” Kwon wrote in a note to clients. “Tax returns are also tracking lower than expected.”

Why Wells Fargo moved its target

The Iran conflict, which began Feb. 28 with the U.S.-Israeli operation codenamed “Epic Fury,” was not part of the bank’s original 2026 outlook. It has since introduced a risk variable that Kwon said demands a recalibration.

Brent crude futures have risen 37% since the start of the war, and the average price for a gallon of gas in the U.S. topped $4 for the first time since 2022. The energy shock has complicated the inflation outlook and, with it, the Fed’s path on rates.

Wells Fargo used an average of prices from Feb. 28 and March 30 to set its revised base, smoothing out the impact of recent selling.

A macro setup Kwon calls “lose-lose”

Kwon described the current environment as a “lose-lose” situation ahead of key economic data. Strong data could push the Fed to hold rates higher for longer. Weak data could stoke stagflation fears.

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Wells Fargo’s inventory-based model also flagged second-half inflation as a growing risk, suggesting upward price pressure is building relative to current levels.

Key risks the bank is watching:

The Iran conflict was not in Wells Fargo’s base case and has added an unpriced risk layer to equities.
Tax returns are tracking below expectations, weighing on the consumer spending outlook.
The bank’s inventory model points to building inflation pressure in the second half of 2026.
For the first time, Wells Fargo’s war pricing model shows stocks pricing in more risk from the conflict than from oil itself.

Markets pricing war more than oil

One of the more striking findings in Kwon’s note: Wells Fargo’s proprietary war pricing model showed that stocks are now pricing in a bigger risk from the conflict than from oil prices. That is a first, according to the bank.

The Nasdaq 100’s forward P/E ratio has contracted 29% since its peak. Roughly one-third of S&P 500 stocks now trade at least one standard deviation below their five-year average forward P/E.

Kwon sees that as a potential opportunity, noting the tech sector is more immune to oil supply shocks than other parts of the market and may offer an attractive entry point.

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Wells Fargo stays structurally bullish

Despite cutting the target, Wells Fargo is not turning outright bearish. The firm’s PRSM model, which tracks Profits, Rates, Sentiment, and Macro, still points to a 14% return over the next 12 months.

Earnings per share forecasts remain unchanged at $315 for 2026 and $365 for 2027. The bank says corporate earnings are expected to stay resilient even as the macro backdrop grows more complex.

Five reasons Wells Fargo stays bullish long-term:

The oil shock is more contained than prior historical episodes.
A meaningful valuation reset has already occurred across equities.
U.S. energy independence gives it an advantage over international peers.
Free cash flow from major tech companies may be inflecting higher.
A restocking cycle is gaining momentum amid lower tariffs and supply chain disruption.

Equity inflows have held up

One data point that stood out to Kwon: equities have kept drawing inflows since the war started. That is a departure from past geopolitical shocks, which typically triggered outflows.

“Equities have surprisingly seen consistent inflows since the war began, a stark contrast to previous episodes of volatility,” Kwon said, adding that investors appear to be hedging rather than fully exiting.

In March, analyst price target upgrades also outnumbered downgrades across the broader market, signaling continued confidence in corporate earnings despite the conflict.

“We believe a lot has been priced into stocks already,” Kwon wrote. “However, other than a firm resolution, we don’t see many upside catalysts.”