Why the stock market is headed for an ‘everything’ rally through the end of the year

Investors look like they’re going to get their top item on their end-of-the-year wish list.

That’s a broad rally that stretches into all areas of the market, according to Ohsung Kwon, a chief equity strategist at Wells Fargo.

Speaking to CNBC on Tuesday, Kwon said the bank was eyeing the S&P 500 to hit 7,100 before the end of the year. That implies the benchmark index rising around 3% through 2025-end.

“I think everything’s going to rally. The market is starting to broaden out now,” he said.

Stocks have been on rocky footing in recent weeks as doubts swirl around the AI trade and the possibility that tech stocks are in a bubble. The tech sector, which has ripped higher amid the enthusiasm for artificial intelligence, has accounted for most of the market’s gains this year, gaining 26% year-to-date.

Kwon said there were five reasons the bank expected the rally to spread through the rest of the market:

1. Seasonals look positive

November and December are known as two of the strongest months of the year for the market.

Since 1927, the S&P 500 gained 59% of the time during November and rose by an average of 1%, according to an analysis from Bank of America.

Meanwhile, December and January tend to be the strongest months for the “laggards” of the stock market, Kwon said, referring to sectors that have underperformed the broader market this year, like energy and financials.

2. Tariffs reversal

Markets are waiting on a Supreme Court ruling over whether President Donald Trump’s tariffs were legal.

A ruling could come in December or January, Kwon speculated. If the court ends up striking down the tariffs, that would remove one of the market’s biggest headwinds this year, with stocks weathering a historic sell-off in April as the Liberation Day tariffs were announced.

“I think there’s going to be a reflation trade into that event,” Kwon said of the expected ruling.

3. A boost from the Big Beautiful Bill

Some investors are expecting a larger tax refund in the next year, thanks to new deductions and adjustments to account for inflation introduced in Trump’s Big Beautiful Bill.

Those provisions are expected to result in around an average extra $800 per person when compared to tax refunds last year, Kwon estimated.

“That’s going to be another reflation event into next year,” he added, referring to how the extra cash could drive investors to sow more money in the market.

4. Earnings are strong

Corporate earnings are still robust, another factor that’s expected to prop up the market through the end of the year, Kwon said.

Of the S&P 500 companies that have reported earnings so far for the third quarter 82% have beat earnings estimates, according to FactSet data, above the ten-year historical average of 75%.

The index is on track to post its largest number of earnings beats since 2021, the firm said in an update last week.

5. An end to the government shutdown

The US government is expected to reopen sometime this week as lawmakers work pass a federal funding bill.

If the bill passes a vote in the House of Representatives and gets the green light from President Donald Trump, it will bring an end to the longest-ever government shutdown, which has left investors in the dark on key economic data like inflation and job gains.

The economic data blackout has obscured the path of Fed rate cuts and sparked more concern that the US economy could continue to weaken as federal workers pull back on spending.