Wells Fargo's Christopher on 2026 investing strategy: Stay with AI, but trim exposure and diversify

Core Viewpoint - The importance of diversification in investment strategies is emphasized, particularly as the market approaches 2026, with a focus on trends in AI capital expenditures and data centers as safer investment alternatives to tech stocks [1][2]. Investment Trends - AI capital expenditures are expected to continue growing next year, indicating a reliable trend, but investors are advised to seek alternative investment avenues to avoid overexposure to tech stocks [2]. - Data centers are highlighted as a viable investment option, allowing exposure to sectors like industrials and utilities, which have lower price-to-earnings ratios compared to tech stocks [3]. Financial Sector Insights - The financial sector, including insurers and banks, is viewed positively, especially with the yield curve steepening, suggesting a favorable environment for financial investments [4][5]. Precious Metals Outlook - The trend in precious metals, particularly gold and silver, is expected to persist, with recommendations to buy on pullbacks rather than chasing prices [6][7]. Consumer Market Analysis - The consumer market is described as bifurcated, with wealthier households continuing to spend while lower-income households struggle, leading to a divergence in consumer spending patterns [8][9]. - Tax refunds are anticipated to provide a temporary boost to consumer spending, but are not expected to significantly stimulate growth [10]. S&P 500 Projections - The S&P 500 is projected to range between 7,400 and 7,600 by year-end next year, driven primarily by earnings, with a target of $300 earnings per share [12].