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The top is in for stocks, but here's how you can still make money: Wells Fargo strategist

  • A major Wall Street firm is predicting there will be fewer runs into record-breaking territory for stocks this year.
  • "We're going to see a bit of a fade here," said Scott Wren, Wells Fargo Investment Institute senior global equity strategist.

A major Wall Street firm is predicting there will be fewer runs into record-breaking territory for stocks this year.

In fact, investors may want to brace themselves for an S&P 500 which actually ends the year in the red.

"We're going to see a bit of a fade here," Scott Wren, Wells Fargo Investment Institute senior global equity strategist, said on Tuesday's "Trading Nation."

He attributes mounting fears over wage pressures and valuations as risks to the rally.

The firm's year-end price target hasn't nudged on the S&P since the 2017 kickoff. Wells Fargo has been sticking by its year-end price target of 2,230 to 2,330 — about 3 to 7 percent lower than where the index is trading now.

"We thought we'd spend some time above that, and we thought we'd see the highs around the middle of the year," he said. "We've been above that level."

It comes as the major indices begin the week up about one percent. For the first time since February, the Dow and S&P posted their fourth positive sessions in a row on Tuesday. The Nasdaq is now up seven out of the last eight sessions.

But the latest strength isn't affecting Wren's forecast.

"I feel pretty comfortable that we're going to end in that range," he said. "The [economic] expansion is long in the tooth."

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Wren said his latest forecast is based on fundamentals and doesn't factor in any of President Donald Trump's plans to pass pro-business legislation.

"Certainly, infrastructure spending, tax cuts and less regulation — that's all pro-growth. But are we going to get some of that implemented in enough magnitude to move the needle on the economy anytime soon? We didn't think it was going to happen quick," he said.

But there are a few spots that could get you through a sideways market and deliver some profits, according to Wren.

Right now, he's overweight consumer discretionary, industrials, financials and health care.

"We want our clients to be in this market," said Wren, who also notes that Europe could bring some positive 'surprises' for investors.

He may appear to be more negative than his peers, but his 2017 call on the market is more encouraging than his longer-term forecast.

Wren argues there's a better than 50-50 chance that the United States will see a recession in the next four years, and it has nothing to do with who won the November presidential election.

"Certainly, if Donald Trump would be re-elected, to not have a recession over the next eight years would be almost impossible," Wren said. "You've got to play for lower returns."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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