Wells Fargo’s top five portfolio ideas for the next 18 months

Wells Fargo offered guidance for investors navigating the coming 18 months in a note this week, highlighting five key portfolio ideas.

Looking ahead to 2025, Wells Fargo anticipates opportunities to “broaden equity exposure” during market downturns and potentially “increase portfolio yields” if interest rates remain elevated.

They also recommend considering “non-traditional asset classes” like commodities and hedge funds for enhanced returns and risk management.

Here are their top five portfolio ideas:

Buy the Dip in Large-Cap Equities: Wells Fargo expects potential market pullbacks due to the upcoming elections and inflation concerns. They advise using these dips to add to your U.S. Large Cap Equity holdings, their preferred equity class.

Lock in Yields with Longer-Duration Bonds: With interest rates at multi-year highs, Wells Fargo sees an opportunity to generate income with “U.S. Short Term Taxable Fixed Income.” They suggest considering longer-term maturities to lock in attractive rates when yields reach the higher end of the range (4.25% – 5.00%).

Invest in Growth Sectors: Fueled by infrastructure spending and AI advancements, Wells Fargo recommends overweighting allocations in Energy, Industrials, and Materials sectors. They also highlight data center REITs and energy companies poised to benefit from the data storage and power needs of AI.

Hedge Uncertainty with Alternatives: Alternative investments like Relative Value and Event-driven strategies can add diversification and potentially offset market volatility. Additionally, Wells Fargo sees private capital emerging as a compelling option due to trends like AI and lower valuations.

Hedge Risks with Geopolitical Plays: Given the heightened economic and geopolitical uncertainty, Wells Fargo suggests using the US dollar, US equities, and investment-grade fixed income as hedges. They also favor commodities and precious metals for their potential inflation hedge and to mitigate supply chain disruptions caused by global conflicts.