Wells Fargo is casting doubt on the stock market's ability to push significantly higher from its current levels. Strategist Ohsung Kwon has trimmed the firm's year-end S&P 500 target to 7,700, down from a previous estimate of 7,950. When measured against Monday's closing figure of 7,619.98, this revised target implies just a 1% upside from where the index currently stands.

In a research note released Monday, Kwon wrote, "We believe the economic and market cycle has entered its final phase, and valuations are likely to face contraction pressure." He further cautioned that the S&P 500 could face a drawdown of 5% to 10% before it has a chance to reach the newly established target. Should the index decline by 5%, it would retreat to the 7,239 level, a threshold not seen since June. In a more severe scenario, a 10% pullback would push the S&P 500 down to 6,858, marking its lowest point since mid-April.