Wells Fargo Predicts a 10% Rebound from Recent Selloffs

February 8, 2018
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Wells Fargo Securities thinks that the downturn represents excellent buying opportunities on undervalued stocks, and believes a 10% rebound could occur by the end of 2018.

American stocks have been shedding value over the past week, sending indexes into the biggest downturns since 2011, and leaving investors worried about the future. Although there’s a lot of uncertain futures in the market right now, there are some analysts, and even large banks, that think the downturn will be followed by a significant rebound.

Wells Fargo Says Buy Now While Stocks Are Low

Christopher Harvey from Wells Fargo told investors recently that “We’ve been telling clients to slowly and methodically invest their cash as the sell-off unfolded. Now, we’re telling clients that they’re free to trade. In the near term, we feel the worst is over for stocks and the pullback in the equity market provides almost a free look at earnings.”

For investors, the big concern right now is that the Federal Reserve will change conditions by reducing its stimulus packages. If interest rates do increase, then corporations may be averse to borrowing and investing in new projects. The strength of the economy is good for the country, but many feel that it’s not going to be ideal for the stock market.

There are many interpretations that can be made of the economic changes in the past year. Unemployment is at record lows, and both corporations and private citizens will enjoy the latest round of tax breaks. This could mean more money being pushed into the economy by consumers, and savings deposits could increase.

Long Term Prospects Are Better Than the Current Market Suggests

Interest rate increases will be short term, but large tax cuts will continue to provide benefits into the future. Apple, America’s largest publicly traded company, has committed to repatriating their off-shore cash reserves at a lowered flat tax rate. This money will be pumped directly back into investments and the company also plans to bring tens of thousands of jobs into the United States. Other companies could do the same, leading to increased values and profits for investors in the form of high value stocks and stock dividends.

Any worry for the stock market at this stage is valid, but the long term prospects are much better than the downturn would indicate. Buying stocks low today, particularly in powerful tech companies, could mean significant long term gains. Selloffs at this point will only lead to losses and will further devalue the stock market, creating better opportunities for investors who are looking at the bigger picture.

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