Wells Fargo’s Hot on Energy, Financials. Not so Much on Consumers

It’s safe to say things are starting to look up for Wall Street’s top analysts.

Like many in the industry right now, Wells Fargo is rather optimistic about the second half of 2025 and beyond. The first half of the year may have been mired in uncertainty, volatility  and tariff talk, but the bank holds out hope that those may encourage economic growth and better opportunities for investors. The wirehouse outlined where it intends to allocate investment over the next year and a half during a midyear outlook event that may provide food for thought as advisors rebalance client portfolios toward the back half of the year.

It’s All About AI

Among the favorable investment opportunities that Wells Fargo has identified for the next 18 months are energy, communications services, financials, and utilities. Much of the projected growth is expected to come from advancements in artificial intelligence and semiconductor technology, said Tracie McMillion, Wells Fargo’s head of global asset allocation strategy. The bank’s exposure to those sectors will mainly come via US large- and mid-cap equities, but investors should remain open to foreign markets, she added. Other areas of optimism include: 

• Healthcare, real estate, and materials are areas where Wells Fargo remains neutral but says growth is possible. 
• Aerospace and defense, which may benefit from geopolitical upheaval and uncertainty.

“While the US has been the clear winner in artificial intelligence, certain other countries are gaining some ground, so we encourage investors to seek diversification across geopolitical boundaries,” McMillion said during a virtual event last week.

Window Shopping. Not all sectors are created equal, however, and Wells Fargo sees two in particular as poorly positioned over the next year and a half. The wirehouse says investments in consumer discretionary, including leisure products and apparel, will be unfavorable as they are industries that will be most affected by tariffs. “That’s part and parcel of the [federal] policy right now,” said Sameer Samana, Wells Fargo head of global equities and real assets. “It’s going to lead to fewer cheaper goods. Consumers will struggle with that, and companies will struggle with that.”

While consumer staples like beverages and tobacco may not be as impacted by tariffs as other items, Wells Fargo doesn’t see much upside. “Those are areas where we see consistent streams of income coming into those companies, but not really so much potential for growth,” McMillion said.