Wells Fargo equity analysts said Friday that an AI "sell-the-news" reaction might help mark the near-term equity bottom.
The analysts stated in an equity strategy note that rising rates are still a near-term risk for the markets.
"We see a little more downside and then a firming with 10yr all-in yields ~35bps off cycle highs and the SPX below our "soft-landing" target (4420)," the analysts wrote.
"We estimate that all-in 10yr rates (i.e., UST + IG spread) have another ~15bps of upside (i.e., risk for equities) before firming. We think a ~25bps discount to the Oct peak creates a reasonable risk/reward for fixed income liquidity providers given that the macro has improved," they added.
Meanwhile, if rates do firm up, Wells Fargo sees growth stocks outperforming "because the rise in real rates has been a weight." They "continue to recommend the Media/Entertainment group despite its +50% YTD total return," said the analysts.