Fundstrat's Tom Lee Encourages Investors to Seize Market Dip Amid Inflation Concerns, June Rate Cut Remains Feasible

In the wake of a market sell-off triggered by the inflation report, investors are being urged to buy stocks, with Fundstrat suggesting a potential June rate cut is still on the table.

What Happened: Fundstrat’s Tom Lee has advised investors to take advantage of the market downturn following the inflation-induced sell-off, as reported by Business Insider. Lee interprets the March CPI report as a sign of ongoing disinflation, making the market dip a buyable event.

“Believe it or not, this was actually a very good CPI report. And I think that’s why the stocks, which sold off today, will ultimately get bought,” Lee said  in a video to clients on Wednesday.

Lee pointed out that the primary cause of inflation in March was an increase in auto insurance prices, a residual effect of the pandemic-induced surge in auto prices. He stated, “This hotter CPI number was due to auto insurance, almost solely. So, it just tells you that this is a timing issue, it’s not structural.”

Despite dwindling probabilities, Lee still believes a June interest rate cut by the Federal Reserve is a viable possibility. He told CNBC, “I don’t think this entirely eliminates the possibility of a June cut,” noting that the Fed will have to process three more CPI reports before making its Jun. 12 interest rate decision.

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Market experts concur that a rate cut would be favorable for stock prices.

Why It Matters: Earlier in March, a report highlighted how inflation reports had unnerved investors, suggesting that rate cuts may not be imminent. However, bullish analysts saw the market dip as a buying opportunity.

In April, despite Federal Reserve Chair Jerome Powell‘s hawkish stance, Lee predicted more than three rate cuts this year.

However, the March inflation report, which came in hotter than expected, raised concerns among market participants and economists. Former Treasury Secretary Larry Summers warned of the dangers of ignoring pricing pressure in the economy.

Despite these concerns, Lee maintains that a June rate cut is still a strong possibility, a move that would likely be beneficial for stock prices.

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