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Schizo-Well Fargo? Bank Has Two Market Gurus – Two Very Different 2013 Predictions

The federal budget quagmire makes S&P 500 forecasting even trickier than usual this year, since whether stock investors make or lose money in 2013 depends a lot on whether Congress can gets its act together. And this week’s averting of the fiscal cliff is just Act One in the budget saga. But Wells Fargo (WFC) has its bases covered either way. Two of its most popular strategists have published radically different outlooks, giving Wells Fargo at once one of the most bullish and one of the most bearish forecasts out there now.

^SPX Chart

^SPX data by YCharts

The bullish view comes from Scott Wren, senior equity strategist with Wells Fargo Advisors. He forecasts the S&P 500 at between 1525 and 1575 by the end of 2013, about an 8.5% rise from 2012 year-end. Wren reiterated these numbers in his weekly report just after Christmas.

The bearish opinion comes from Gina Martin Adams, Wells Fargo Institutional Strategist, whose forecast calls for the S&P 500 at 1390 by year-end 2013, about a 2.5% decline. Adams appeared on Bloomberg TV to discuss her outlook in early December, and it has since emerged as the lowest prediction among any of the 20 or more most popular reports.

Depending on which philosophy you pick, investors should either be underweight in healthcare stocks and utilities (Wren) or overweight in them (Adams). Wren likes consumer discretionary stocks for 2013; Adams does not, instead preferring consumer staples. Neither strategist is hopeful about energy stocks.

So, if you were about to buy, or sell, shares in Pfizer (PFE), Southern Co. (SO), Coca-Cola (KO) or Procter & Gamble (PG), Wells Fargo stands with you, and against you!

Wren’s optimism is based in a belief that Congress will, in effect, protect the markets from the worst of the fiscal cliff consequences. Although he has few illusions that Congress can quickly resolve long-term budget issues, he correctly predicted it would stave off the deep spending cuts and big tax hikes that could devastate the economy; retroactively to Jan. 1, if necessary. Without the Congressional distraction, he expects confidence all-around – from businesses, consumers and investors – to improve through 2013. He notes that new car sales and housing were already looking healthier.

US Auto Sales Chart

US Auto Sales data by YCharts

Adams, the bear, contends that a credible debt reduction plan from Congress is necessary to spark the corporate spending needed to grow the economy and stock prices. A sentiment echoed by Honeywell’s (HON) CEO David Cote this week. She notes that capital spending has been falling, which historically has been a precursor to recession. She’s skeptical that earnings from corporations, which have recorded near-record profit margins recently, can grow enough this year to push share prices noticeably higher in an unresolved (or at least, unaddressed) domestic debt crisis.

US Public Debt Chart

US Public Debt data by YCharts

For what it’s worth, both strategists’ forecasts for 2012 turned out to be a bit low, along with most of their peers. At the end of 2011, Wren was predicting the S&P 500 would be at between 1325 and 1375 now. Adams forecasted that the market would end 2012 at 1360. It wouldn’t be surprising if they each got a turn at being right at some point next year.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.

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