Wells Fargo warns S&P 500 may retest recent lows amid market uncertainty

In the United States, the S&P 500 Index, which is a crucial benchmark for U.S. stock performance, is facing significant challenges. Recent analysis from Wells Fargo indicates that the index might retest the lows experienced last month, specifically after reaching a low of approximately 4,385 on April 7, 2025. This decline was precipitated by various economic concerns, notably President Donald Trump's recent tariff announcements aimed at reshaping U.S. trade policy, which resulted in a brief bear market surrounding those announcements. As of May 1, 2025, stocks saw an uptick, supported largely by robust earnings from major tech companies, including Meta Platforms and Microsoft, which have provided some momentum and hope for recovery among investors. Despite the positive performance observed in certain sectors, Wells Fargo's senior global market strategist Scott Wren expressed caution regarding the potential for the S&P 500 to recover fully. The prevailing uncertainty regarding tariffs, economic growth, and political factors is leading analysts to believe that a retest of previous lows could be likely. Wren noted in his statement that the ongoing question about whether a bottom has been reached is complex, and he emphasized the substantial risks tied to tariff negotiations and other economic issues that could manifest in the coming months. Moreover, Wren mentioned that while the market might experience a range between 5,000 and 5,500 in the near term, this fluctuation will require catalysts to spur significant upward movement. He also elaborated on potential hurdles that could arise, especially concerning Republican budget legislation passage through Congress, which he predicts may face roadblocks leading up to Memorial Day. With no definitive trade agreements in place, the uncertainty surrounding U.S.-China relations remains a major concern, especially after China denied any claims from the U.S. suggesting negotiation progress. In summary, while there are glimmers of hope for a market rebound due to strong tech earnings, the overarching narrative remains clouded by geopolitical and economic uncertainties, leaving investors wary about future movements in the S&P 500. Strategic reallocations towards sectors like information technology, communications services, financials, and energy are recommended as a way to navigate these choppy market conditions until a clearer upward trend becomes visible.