Wells Fargo's Anna Han Says Markets May 'Need A Correction:' Here's Why

Wells Fargo Securities Equity Strategist Anna Han reportedly said the markets have gotten ahead of themselves and a correction may be due.

What Happened: "When we think about earnings growth, we see declines this year, we see margin compression this year. I think the market has gotten a little ahead of itself at the start and for the first four months and that’s going to need a correction," Han told Bloomberg TV.

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Despite the inflationary pressures, recent banking turmoil and mixed earnings announcements, markets are still in the positive territory on a year-to-date basis.

The SPDR S&P 500 ETF Trust (NYSE:SPY) has gained over 8% while the Invesco QQQ Trust Series 1 (NASDAQ:QQQ) rose over 19% since the beginning of the year.

Han asserted it’s a hot start to the market so far and that Wells Fargo has lowered its intermediate price target down to more about 10% from here.

"Now, 10% can be a big figurehead number but think about really the assumptions underneath that. We are only assuming about a 100 basis points in margin compression for net margins. That’s not that aggressive given everything we have gone through and the fact that consumer spending is slowing, retail spending is slowing and you are seeing inflation come off the boil. So, we think it’s pretty reasonable and it is very possible," she explained.

Rate Path: The equity strategist thinks the Federal Reserve will hike interest rate at its next policy meeting in May but towards the end of this year, the central bank may get pushed into easing as the economy goes into recession and earnings take a hit.

"And that sort of easing has people already looking forward to what’s coming in 2024, what growth prospects can I start thinking about and that helps buoy up the market towards the end of the year," she said.

Interestingly, two Fed officials, on Thursday, reiterated the need for more interest rate hikes to rein-in inflation just as the central bank is set to enter a silent period from April 22 to May 4 ahead of its next monetary policy announcement.

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