Long-time market bull Tom Lee predicts a profitable phase for investors in September.
According to Lee, the S&P 500 is set to climb more than 100 points this month. However, he warns that the positive momentum has an expiration date.
“We could see a really strong rally in September,” said Fundstrat Global Advisors’ co-founder and head of research on Friday to CNBC’s “Trading Nation”. “We thought there was no window of time for a 10% correction for most of 2021. The window of time when we think a potential 10% retreat could begin is October.”
Lee attributes the vulnerability to growing fiscal and monetary risks and the uncertainty surrounding the pandemic and flu season.
“We’re getting so much closer to tapering,” said the CNBC representative. “This is really when the debt ceiling rhetoric returns, and if there is any debt ceiling concern, the bond market could panic.”
When turmoil occurs in the bond market, it usually spills over into stocks. But in the meantime, Lee hints that he would be a buyer.
He sees the uncertainty surrounding Covid-19 Delta cases and their economic impact, which is causing the Federal Reserve to remain cautious for longer. According to Lee, this is a recipe for new market highs.
“The US is still in an underlying expansion. This is a formula risk,” said Lee, who led equity strategy for JPMorgan Chase from 2007-2014.
As evidence, he cites a comeback in the price of crude oil and the return on Bitcoin over $ 50,000.
Lee’s top market picks still include trades most closely linked to the economic recovery. He especially likes energy and materials. He also sees opportunities in FAANG stocks, also known as Facebook, Amazon, Apple, Netflix and Alphabet.
“My guess is that quite a number of investors thought we were going to have a 10% correction in August,” Lee said. “So money was taken off the table. When people take another risk, they usually start buying cyclical and epicentric ideas.”
Lee believes the S&P 500 could exceed 4,650 in September – 50 points above its year-end target. On Friday, the index closed at 4,535.43, around a quarter percent below its record high.
Disclosure: Tom Lee owns Bitcoin.
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