Wells Fargo cut its year-end target for the S&P 500 to 7,700 from 7,950 in a note released Tuesday. The call lands directly on SPY and VOO, the two exchange traded funds that track the index and sit inside more retirement accounts than almost any other ticker.
Hours earlier, a separate Wall Street strategist warned clients to brace for the same kind of pain, an 8% to 10% pullback before year-end.
SPY closed Monday, Sept. 14, at $764.29, and VOO closed at $699.30, according to Investing.com and Vanguard. Based on each fund’s current level, a 5% to 10% pullback would take SPY down to roughly $726 to $688 and VOO down to roughly $664 to $629.
Wells Fargo’s 7,700 target works out to about $772 for SPY and $707 for VOO, using each fund’s ratio to the index.
What the pullback means for SPY and VOO investors
SPY and VOO hold the same 500 companies in the same weights, so they will fall and recover by almost identical percentages.
The funds differ mainly in cost. SPY charges a 0.09% expense ratio, and VOO charges 0.03%, a gap worth $6 a year on every $10,000 invested, according to ETF data. That gap does not change what a pullback does to either fund, only what it costs to sit through one.
VOO alone holds about $1.05 trillion in assets, and SPY holds roughly $1.5 trillion, according to Vanguard and VOO.us data. Those totals sit inside 401(k) plans, IRAs, and brokerage accounts held by tens of millions of people.
Wells Fargo has now moved its 2026 target three times this year, and each revision changes what those balances are worth on paper.
Why these funds face the same rate risk as the index
The Federal Reserve meets Wednesday, and traders are pricing in roughly 90% odds of a quarter point rate hike, according to Goldman Sachs. It would be the first increase under Chairman Kevin Warsh, and the first in years.
The 10 year Treasury yield already touched 5.02% this week, its highest level since 2007, according to CNBC.
More S&P 500:
- Bank of America resets its S&P 500 price target with a clause
- Citi says Fed rate hike could deliver stock market shock
- S&P 500’s greatest risk is fast becoming reality
Higher yields make future corporate profits worth less today, which pressures every stock inside SPY and VOO at once. Dean Curnutt, founder of Macro Risk Advisors, expects an 8% to 10% pullback in the S&P 500 this year, according to a Seeking Alpha report.
He sees a possible second leg lower in December, driven by companies that cannot pass rising costs on to customers.
The S&P 500 also is not cheap heading into that decision. The index carries a forward P/E ratio of 19.5, according to FactSet data cited by TheStreet’s Todd Campbell, and its Shiller CAPE ratio sits near 40.7, about 45% above its 20 year average. Rich valuations leave less room to absorb a rate shock without a pullback.
Also read: Dow Jones vs. S&P 500: Which index actually represents the market?
The 2018 parallel investors keep bringing up
Curnutt compared the setup to 2018, when the S&P 500 peaked in September and fell nearly 20% by Christmas Eve.
He said a defensive posture is the correct approach heading into the fall. CNBC’s Jim Cramer made the same comparison days earlier, saying there are some eerie similarities between the current moment and the fall of 2018.
That selloff ended fast. The Federal Reserve cut rates three times in 2019, and the S&P 500 closed that year up nearly 30%. Warsh is moving in the opposite direction now, and Cramer said he does not expect Warsh to repeat that earlier mistake.
Beyond historical comparisons, the market’s underlying math is flashing warning signs.
Related: S&P 500’s greatest risk is fast becoming reality
A few more numbers explain why strategists are on alert:
- SPY fell to $760.88 Tuesday from a prior close of $764.29, and VOO dropped 0.46% Monday to $699.30, according to Investing.com and Vanguard.
- Equity allocations have reached 72% of portfolios versus fixed income, the highest share since 1969, according to the Seeking Alpha report on Kwon’s note. He estimates a fair weighting closer to 60%.
- Nvidia, Microsoft, and Apple alone make up close to 19% of VOO, according to a fund analysis, a concentration that turns a handful of AI trades into a large share of any index fund’s return.
- Political opposition blocked or delayed 75 data center projects worth $130 billion in the first quarter of 2026 alone, according to Brookings, a headwind for the AI spending inside both funds.
What concentration means for two funds built to diversify
SPY and VOO are sold as instant diversification across 500 companies, yet a handful of AI dependent names now drive most of their swings.
Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, and Tesla carry outsized weight in both funds, so their earnings move fund values more than any single Fed decision does. A rate hike tests that concentration directly.
Political resistance to new data centers is another test, and it is already slowing the AI buildout that has powered fund returns.
Wells Fargo still expects SPY and VOO to finish the year higher than where they trade today, and that target has barely moved since June. What changed is the path to get there, not the destination. Anyone holding either fund through a Fed hike is really betting that a handful of AI companies can keep growing into valuations that already assume they will.
Related: Bank of America’s new warning should concern stock investors
