Wells Fargo says to buy U.S. stocks, avoid EMs
Despite a strong start to the year for the MSCI Emerging Markets Index, which gained 6.9% year to date compared to a 3.3% decline in the S&P 500 Index, Wells Fargo remains unconvinced.
'We are skeptical,' analysts wrote. 'The long-term EM equity track record has been uninspiring. EM earnings have barely budged since 2007, and index levels remain roughly 15% below their pre-global financial crisis highs.'
The firm points to structural issues in emerging markets, including 'political and economic instability, corporate governance concerns, variable regulatory risks, as well as China's excessive debt, slumping property sector, and slowing growth.'
While Wells Fargo acknowledges the rally was driven by 'modestly better-than-expected EM economic data prints, signs of bottoming consensus earnings expectations, China stimulus measures, and a broadly weaker U.S. dollar,' it warns that 'the EM sentiment pendulum has swung too far positive.'
Trade tensions are another concern. 'In our view, trade frictions only add to the headwinds these markets will face,' the note said.
Wells Fargo favors developed markets, noting that 'DM have the benefit of a more stable and predictable regulatory environment, while recent news of increased fiscal spending in Europe is likely to remain a tailwind to investor opinion and returns.'
'We favor reallocating to U.S. Large Cap, U.S. Mid Cap, or Developed Market (DM) ex-U.S. Equities to maintain overall equity exposure,' said Wells Fargo.
For risk reduction, 'investors could look to Commodities or select fixed-income investments to reduce equity allocations.'
Related articles
Wells Fargo says to buy U.S. stocks, avoid EMs
Morgan Stanley sees 'more risk than reward' for Asana, downgrades stock to sell
'Best of both worlds:' Wells Fargo starts SAP coverage at Buy
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Insider
10 minutes ago
- Business Insider
Stock Market News Review: SPY, QQQ Stumble as Trump Announces New Tariffs, Pressures Powell to Resign
The S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) whipsawed between positive and negative territory several times on Tuesday. SPY closed in the red while QQQ was able to pull through in the green. Don't Miss TipRanks' Half-Year Sale Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. The market took a turn lower after President Trump announced that more countries would soon receive letters detailing their updated tariff rates. He also said that the August 1 tariff pause deadline would not be extended. So far, the U.S. has sent letters to 14 countries. Trump is also considering a steep tariff on copper imports. 'I believe the tariff on copper, we're going to make it 50%,' said Trump during a Cabinet meeting. Afterward, copper futures surged higher by 17%, marking the highest intraday rise in 37 years. Commerce Secretary Howard Lutnick added that the tariff could be implemented either later this month or on August 1. If 50% wasn't high enough, Trump announced that he may tariff pharmaceutical imports at a 200% rate. 'They're going to be tariffed at a very, very high rate, like 200%,' warned Trump. The tariffs would begin in a year to a year and a half in order to give pharmaceutical companies time to set up shop in the U.S. In addition, Trump also has plans for tariffs on semiconductors and other goods. In a Truth Social post, Trump criticized Fed Chair Jerome Powell for 'whining like a baby about non-existent Inflation for months, and refusing to do the right thing.' Trump added that import prices have fallen lower, citing a study from the Council of Economic Advisers (CEA). Earlier in the day, Trump said that Powell ' should resign immediately.' He also said that he wouldn't be opposed to Congress investigating Powell over the Fed's $2.5 billion Washington, D.C. headquarters renovation. To end on an optimistic note, Goldman Sachs (GS) raised its 2025 SPX price target to 6,600 from 6,100. Bank of America (BAC) tagged along and hiked its target to 6,300 from 5,600. The S&P 500 (SPX) closed with a 0.07% loss while the Nasdaq 100 (NDX) inched higher by 0.07%.
CNBC
11 minutes ago
- CNBC
Retail investors outplayed fund managers over tariffs: Robinhood CEO
Retail investors, once dismissed as speculators, are now outmaneuvering professional fund managers by adhering to a simple strategy: buy into companies you believe in for the long haul, according to Robinhood's CEO. Institutional investors have spent the weeks since April 2's so-called "Liberation Day" worrying over macroeconomic signals and taking "risk off across the board," Vladimir Tenev told CNBC's "Squawk Box Europe" Tuesday. The S & P 500 fell sharply in the aftermath of the tariff announcements as institutional investors fled to perceived safe havens. The index has now not only surpassed its pre-tariff high of 5670, however , but has also rallied by 25% to 6237 since its bottom on April 8. Retail investors bought the dip — and won, Tenev said. Data from VandaTrack shows retail investors piled $85 billion into U.S. equities and ETFs between April 1 and July 7 — the highest on record, compared to the same period every year since 2021. Tenev contrasted this with institutional players who "think about stocks indirectly," often selling off assets based on macroeconomic factors like tariff news or perceived headwinds from a lack of tax cuts. Contrastingly, "what you're seeing is retail investors are investing in these companies because they believe in them," Tenev said, calling it a "back to the basics" approach. He added that investors on Robinhood's brokerage platform were particularly focused on stocks such as AI darling Nvidia , alongside Tesla and Amazon , for instance. "So when they see a massive macro-driven dislocation, they tend to look at that as a buying opportunity, because it doesn't affect the market positioning of these individual stocks on an idiosyncratic basis," he added. This conviction-led strategy is a significant divergence from the behavior of retail investors in the past, which is "healthy for the markets," Tenev said. .SPX YTD mountain
Business Insider
26 minutes ago
- Business Insider
Freeport-McMoRan initiated with a Buy at Stifel
Stifel analyst Ralph Profiti initiated coverage of Freeport-McMoRan (FCX) with a Buy rating and $56 price target The firm, which has a 'tactical' gold price target of $3,800/oz on a six to twelve month view, argues that gold equities can 'go much higher' compared to the price of gold and S&P 500. On copper, which the firm says is 'under-owned,' it advises increased exposure to take advantage of heightened supply stresses and estimates the incentive copper price is $5.00/lb. Don't Miss TipRanks' Half-Year Sale Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
