Strategists at Wells Fargo said Monday they believe that the stock markets have priced in much of the 2024 optimism, and may face new headwinds going forward.

“Markets may struggle to advance meaningfully past recent highs, while uncertainties surrounding the path of inflation and the timing and magnitude of Fed rate cuts persist,” they said.

“Still, we would view any periods of equity market weakness as opportunities to add exposure, since our outlook through 2025 anticipates improved revenue growth and expanding margins,” added strategists.

Citing a slightly improved economic outlook, Wells Fargo has updated its 2024 and 2025 equity earnings and price targets based.

Following the earnings recession experienced in 2022 and 2023, analysts expect earnings per share (EPS) to increase from $240 in 2024 to $260 in 2025.

This outlook is consistent across various equity asset classes, influenced by forecasts of broadly improving economic growth and a strong focus on cost containment among companies “and is reflected in our higher price targets for 2024,” analysts wrote.

“A point of emphasis is that these year-end targets still allow for potential market fluctuations in the track of inflation and Fed policy interest rates,” they said.

Hence, analysts believe it is still premature to tilt toward a wider rally and continue focusing on a quality-oriented approach. The Wall Street giant views US large-cap stocks “as the highest quality major equity class.”

“Our preference for quality extends to our guidance on international equities where we prefer Developed Market ex U.S. (neutral) over Emerging Market equities (unfavorable),” they added.