Fundstrat’s Tom Lee, a prominent investor, believes the US stock market is still in a bull run, even after a recent correction. He thinks the S&P 500 has already bottomed out this year.
A Bull Market, But Which Kind?
While Lee is confident about the market’s overall direction, he’s unsure about the recovery’s speed. He suggests two possibilities: a quick rebound (like in 2020) or a more gradual recovery with periods of consolidation (similar to 2011). The market’s next move, he says, depends largely on how investors react to several key risks.
Major Market Concerns
Lee highlights several investor concerns that could influence the market:
- Geopolitical risks: The ongoing trade tensions with China, potentially escalating into a broader conflict.
- Recession fears: The ripple effects of economic shocks, potentially leading to a global recession.
- Financial crisis concerns: Worry about a financial crisis stemming from deleveraging.
- Inflation and Fed action: Concerns that rising inflation will force the Federal Reserve to aggressively raise interest rates (“greedflation”).
- Earnings estimates: If company earnings estimates fall significantly, it could put further downward pressure on stock prices.
Technical Indicators Suggest a Bottom
Lee points to a key technical indicator: only a small percentage of S&P 500 stocks are currently trading above their 50-day and 200-day moving averages (6% and 19%, respectively). Historically, this setup has often preceded strong market gains. He emphasizes that this low percentage suggests a potential structural low has been reached.
The Bottom Line
Despite the uncertainties, Lee’s overall outlook remains bullish. He believes the S&P 500 has likely hit its low for the year and that the market will continue its upward trend, although the path may be bumpy. As of Friday’s close, the S&P 500 stood at 5,282 points.
