Equities should do very well after Fed rate cut if no recession occurs, says Wells Fargo's Cronk

Market Outlook & Strategy - Wells Fargo raised its year-end S&P target to between 6600 and 6800, while anticipating increased volatility [1] - The market has largely priced in the Fed's rate cuts and a relatively stable economy, leaving limited room for further capitalization on this dynamic in the near term [2] - Wells Fargo believes 2026 could be an even better year, given the resolution of fiscal policy and the potential continuation of accommodative monetary policy [3] - The market indicates positive momentum for the remainder of the year and into the next, supporting a bullish outlook [6] Sector Allocation - Wells Fargo is underweight on small-cap stocks, despite their recent outperformance, citing quality degradation and the prevalence of non-earners in the small-cap universe [10] - The idea of rotating from tech to small caps is considered nonsensical, especially given the significant market capitalization difference ($3 trillion vs $28 trillion) [8][9] Economic Indicators - Corporate balance sheets are in a strong position, with high yield spreads at fresh lows [4] - Banks are at all-time highs despite the Fed cutting interest rates, indicating no significant concerns about credit quality or defaults [5]