Wells Fargo CIO Boosts S&P 500 Target, Warns Against Small Caps Amid Market Rally

Wells Fargo's CIO, Darrell Cronk, raised his year-end S&P 500 target to 6,600-6,800, citing new market highs and the Federal Reserve's easing cycle. He advises against investing in small caps, focusing on a diversified portfolio with a mix of stocks and bonds. Cronk expects the market to remain strong, with the S&P 500 reaching his target range.

In a recent interview with CNBC, Darrell Cronk, chief investment officer for wealth and investment management at Wells Fargo, raised his year-end S&P 500 (SP500) target to between 6,600 and 6,800. Cronk's outlook reflects new market record highs and the Federal Reserve’s easing cycle Wells Fargo CIO raises S&P 500 target, advises against small caps^[1].

Cronk expects volatility to increase but remains optimistic about the current economic conditions, which he believes are favorable for continued growth. The Federal Reserve’s recent interest rate cuts have created a positive market environment, according to Cronk. He noted that high yield spreads are at fresh lows and banks are at their all-time highs despite the rate cuts, suggesting economic strength Wells Fargo CIO raises S&P 500 target, advises against small caps^[1].

Cronk was particularly optimistic about long-term market prospects. He cited stable fiscal policies, continued monetary easing, and strong corporate balance sheets as factors that set up 2026 to be an even better year. He emphasized that the markets are indicating continued strength for the remainder of this year and into next year Wells Fargo CIO raises S&P 500 target, advises against small caps^[1].

However, Cronk expressed skepticism about small caps (IWM) despite their recent outperformance. He acknowledged that small caps typically perform well in two scenarios: emerging from recessions and during aggressive Fed cutting cycles. However, he questioned the sustainability of their current strength, pointing to significant market cap disparities. Cronk specifically recommended against rotating investments from technology (XLK) to small caps (IWM) Wells Fargo CIO raises S&P 500 target, advises against small caps^[1].

Wells Fargo has recently moved to an underweight position on small caps (IWM), (SP600), citing concerns about quality deterioration in the small cap universe due to private capital cherry-picking the good companies Wells Fargo CIO raises S&P 500 target, advises against small caps^[1].

In a related development, the Federal Reserve announced a 0.25% rate cut on Wednesday, September 17, in response to President Donald Trump’s demands to do so amid ongoing tariff worries for the economy. The committee voted 11-1 to issue the quarter-percent rate cut and said two more 0.25% reductions are likely before the end of the year Federal Reserve issues first rate cut during Trump's second term^[2].