• The S&P 500 probably isn’t hitting fresh highs anytime soon, consistent with Wells Fargo.

• A handful of headwinds will keep a lid on further gains, strategists said.

• The bank pointed to concerns surrounding a possible recession, AI, and geopolitical uncertainty.

The stock market’s long winning streak may be done for now, Wells Fargo said.

The bank’s strategists warned that stocks were unlikely to maneuver significantly higher within the approaching months and of their view, the market is “now fairly valued.”

That’s because to a trifecta of headwinds will cap gains for the S&P 500. The benchmark index is liable to face resistance around 5,670, the record high it notched earlier this summer.

Stocks continued to rally in August as investors gained more confidence a pair of sentimental landing and positioned for ambitious rate cuts from the Federal Reserve.

Nevertheless, markets have much more uncertainty still looming, the bank said, pointing to geopolitical tensions inside the Middle-East, doubts over whether the economy can avoid a recession, and concerns that the AI rally may be running out of steam.

Stocks are also navigating an election 12 months, which has historically meant more volatility. Investors are assessing an uncertain political landscape, with presidential candidates Kamala Harris and Donald Trump remaining neck-and-neck in the most recent polls.

“While we imagine the S&P 500 Index stays in an uptrend, it now finds itself facing key resistance on the all-time high,” strategists said in a note on Monday. “For these reasons, we discover it unlikely that the S&P 500 Index will reach meaningful latest highs within the approaching months.”

While stocks may not see a rally to fresh records soon, there is likely to be a possibility for investors to control and reallocate their portfolios to “especially unfavorable areas” — unloved areas of the stock market could have huge upside within the approaching years.

That features emerging markets, along with US consumer discretionary, consumer staples, utilities, and real estate sectors.

Investors have tempered a number of of their enthusiasm for stocks for the explanation that start of the 12 months, when lofty expectations for AI and easing monetary policy from the Fed boosted the market to a string of record highs. Since then, growth fears have overshadowed excitement about rate cuts, and questions on the sustainability of the AI rally have dented tech bullishness.

In the most recent AAII Investor Sentiment survey, around 45% of investors said they feel bullish with regard to the stock market over the following six months, down from 51% of investors who felt that way a few month ago.

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