Wells Fargo sees trouble for stocks — brace for a 4% to 8% slide before year’s end

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Stocks likely to end 2017 on sour note, says Wells Fargo’s Scott Wren

The stock market could come within a hair of a correction in the next three months, Wells Fargo says.

Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute, sees problems for the as the record year comes to a close.

"Our midpoint of our target range for year-end 2018 is 2,500," Wren said Tuesday on CNBC's "Futures Now." "We're basically there right now."

Wren is predicting a 4 to 8 percent dip from current levels before year's end. The official definition of a correction is a 10 percent drop.

It appears his forecast may already be materializing. Just look at the Dow. The index is on its first four-day losing streak since June.

But it's important to note that it has been a banner year for stocks. The Dow has soared nearly 13 percent while the S&P 500 is up 12 percent. The tech-heavy Nasdaq has also reaped big gains, surging nearly 19 percent this year.

"Valuations are meaningfully stretched in that the trailing 12 month P/E ration on the S&P 500 is 20 and change. And, that's against about a 16½ 30-year median," Wren said.

With stocks on the expensive side, an economy that's "not really accelerating" and a Federal Reserve that's firmly executing its rate-hike policy — Wren doesn't see much upside left.

"The net net move between now and the end of 2018 is probably going to be pretty small," he added.

There's a silver lining in Wren's 2017 downward spiral forecast. His year-end S&P 500 price target for 2018 is 2,450 to 2,550, which would suggest solid gains next year.

"That would give us say a 5 to 8 percent return [in 2018]," Wren said. "I think we're going to have an opportunity to buy some stocks."

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