Tom Lee, head of research at Fundstrat, thinks the recent stock market drop is a great buying opportunity. He encourages investors to stay positive despite the recent downturn.
A Buying Opportunity?
Lee, a veteran investor, appeared on CNBC and stated that the recent correction, which saw the S&P 500 fall from over 6,000 to 5,832, is a chance to buy, not sell. He believes the market’s underlying strength remains. He specifically pointed to the market’s resilience in 2024, noting that significant weakness has been rare. While acknowledging the pain of the December 18th drop, he maintains that the fundamentals supporting stocks are still strong.
VIX Spike Signals a Bottom?
Lee highlighted the significant jump in the VIX (volatility index) on December 18th. Historically, such sharp increases in the VIX have often coincided with market bottoms. He described the December 18th drop as a “capitulatory” event, citing a large drop coupled with a huge VIX spike. He pointed out that only four times in the VIX’s 35-year history has it risen 60% in a single day, making December 18th the fifth. In three out of the four previous instances, the market recovered all losses within a week. Even in the instance where recovery took a month, the market eventually rebounded. Lee suggests that the December 18th sell-off was likely driven by year-end panic selling, particularly in momentum trades. Interestingly, he noted that VIX futures barely moved, suggesting investors were primarily seeking short-term protection.
Current Market Status
As of Friday’s close, the S&P 500 stood at 5,930.
Disclaimer: This information is for general knowledge and shouldn’t be considered investment advice. Always do your own research before making any investment decisions.
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