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Tom Lee has lengthy referred to as for a inventory market rally after the Federal Reserve cuts rates of interest.
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However after Wednesday’s huge 50 foundation level lower, Lee says he sees uncertainty looming forward of the election.
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Different analysts have additionally warned of volatility main as much as the November vote.
Distinguished inventory market bull Tom Lee has lengthy referred to as for a giant rally after the Federal Reserve cuts rates of interest.
However after a giant 50 foundation level lower on Wednesday, Lee says he is feeling cautious forward of the November election.
“This Fed lower cycle I feel is setting the stage for markets to be actually robust over the subsequent one month or subsequent three months,” Lee, co-founder and head of analysis at Fundstrat World Advisors, informed CNBC in a Thursday interview.
“However, what the shares do between now and as an instance election day, I feel continues to be a whole lot of uncertainty. And that is the explanation why I am a little bit hesitant for traders to dive in,” he added.
Within the days main as much as the Fed’s coverage assembly, Lee mentioned a charge lower would place shares for a multi-week rally, bolstered by additional confidence that extra charge cuts are on the horizon and {that a} delicate touchdown is within the playing cards.
That rally would occur no matter a 25 or 50 foundation level lower, he mentioned, if the Fed advised future cuts are possible. Even then, although, Lee acknowledged there could be volatility main as much as the election, however would settle down afterward for a robust yr forward.
Lee has been bullish on shares for years, with predictions that the S&P 500 might triple, hitting 15,000 by 2030.
Different analysts have additionally acknowledged the market volatility related to presidential elections.
That volatility usually peaks in mid-October forward of the elections in November, after which shares see a reduction rally as soon as the end result is understood, SoFi’s Liz Younger Thomas informed Enterprise Insider earlier this month.
With election-related volatility forward, Lee recommends investing in cyclical shares in areas like industrials, financials, and small caps.
Small-cap shares, particularly, will profit from charge cuts and what Lee calls a “cyclical enhance to the financial system,” which can end result from a drop in shoppers’ prices like mortgages, auto loans, and bank cards.
“All these are huge tailwinds for small caps,” he mentioned.
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