Analysts at Wells Fargo & Co believe that stock market regions that are not favored by the market have the opportunity to experience significant upside potential in the coming years.
Wells Fargo & Co analysts said that in the next few months, it is unlikely that US stocks will significantly rise, and in their view, the market is "now reasonably valued".
This is because three major resistances will limit the S&P 500 index's rise. The S&P 500 index may encounter resistance around 5670 points, which was set earlier in the summer.
Due to investors' confidence in a soft landing for the US economy and preparations for aggressive rate cuts by the Federal Reserve, US stocks continued to rise in August.
However, the market still faces many uncertainties, the bank pointed out, including geopolitical tensions in the Middle East, doubts about whether the economy can avoid a recession, and concerns about the momentum of AI stocks.
In addition, US stocks also have to deal with an election year, which historically means more volatility. Investors are assessing an uncertain political landscape, with recent polls showing similar levels of support for presidential candidates Harris and Trump.
Strategists said in a report on Monday, "While we believe the S&P 500 index is still in an upward trend, it now finds itself facing key resistance levels at historical highs. For these reasons, we believe the S&P 500 is unlikely to reach meaningful new highs in the next few months."
Although US stocks may not soar to new record highs in the short term, there is an opportunity for investors to adjust and reallocate their portfolios to "particularly unfavorable areas" - areas of the stock market that are not favored by the market, which can potentially generate significant gains in the coming years.
This includes emerging markets, non-essential consumer goods in the USA, essential consumer goods, utilities, and real estate industries.
Since the beginning of the year, investors' enthusiasm for US stocks has cooled down, as the high expectations for artificial intelligence and the Federal Reserve's easing of monetary policy drove the market to new highs. Since then, growth concerns have overshadowed excitement about rate cuts, and doubts about the sustainability of the AI uptrend have weakened optimism in technology stocks.
In the latest AAII investor sentiment survey, about 45% of investors expressed optimism about the US stock market in the next six months, down from about 51% about a month ago.