Analysts at Wells Fargo are wary of overly optimistic investors having sent stocks to record highs.

They say the hopes for lower interest rates and stronger corporate earnings are misplaced.

From a client note on Tuesday:

  • “We believe the market’s disappointment upon realizing that its investment case is built on hope rather than reality will lead markets to pull back”
  • “Our view is that earnings for all equity classes peaked and will move lower as the economy weakens and revenue growth stalls. In the near term, we expect pressure on earnings as well as prices with bouts of weakness and range trading”

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Wells Fargo tends towards the less optimistic side of the analyst spectrum. We'll see if they are right though.