The stock market has been extremely volatile in recent months, and investors have felt the effects.
Wells Fargo Investment Institute believes the volatility has to do with investors considering both hard and soft landing scenarios as the Federal Reserve continues to battle inflation.
But WFII said fears of a recession may be overblown, predicting a gradual slowdown in the coming months before a recovery by the end of 2025.
The firm points to data showing that companies in the S&P 500 index have been mentioning a potential recession less in recent earnings calls, returning to pre-pandemic levels.
“While fears of a hard landing are fading, uncertainties remain. We see the associated volatility as an opportunity for investors to reallocate portfolios to our preferred sectors (communication services, energy, financials, capital goods and materials) as the market approaches recent lows and to trim overallocated areas (we view consumer discretionary, consumer staples, real estate and utilities as less favorable) as the market approaches recent highs,” global equity strategist Chris Haverland wrote in a note.
