Darrell Cronk, Chief Investment Officer of Wells Fargo Wealth & Investment Management, has raised his year-end target for the S&P 500 to a range of 6600-6800 points amid record-high stock markets and the Federal Reserve's initiation of an easing cycle.

In an interview, Cronk elaborated on the market outlook, noting that although volatility is expected to increase, the current economic environment favors sustained growth. He believes the recent Fed rate cuts have created a positive market environment, "this morning's high-yield spreads hit new lows," adding that despite the rate cuts, bank stocks have reached all-time highs—a rare phenomenon historically signaling economic strength rather than weakness.

He is particularly optimistic about the long-term market prospects: "2026 could be an even stronger year," citing stable fiscal policies, continued monetary easing, and robust corporate balance sheets as reasons. He emphasized, "The market is sending signals: everything is set for the remainder of this year and next."

When discussing specific sectors, Cronk expressed skepticism about the recent outperformance of small-cap stocks. He acknowledged that small-caps typically excel in two scenarios: during economic recovery from recessions and during aggressive Fed rate-cutting cycles. However, given the significant market capitalization disparities, he doubts the sustainability of the current rally.

Cronk explicitly opposed shifting investments from the technology sector to small-caps: "The so-called rotation from tech stocks to small-caps... seems somewhat absurd to us." He expressed concerns about deteriorating quality in the small-cap space, noting, "Private capital is flooding in, scooping up many high-quality companies and taking them private."

Based on these assessments, Cronk confirmed that Wells Fargo has recently taken an underweight position on small-cap stocks. "We believe this remains the right strategy."