Tom Lee Sees 'Right Pieces' For A Market Bottom: 'Investors Are A Little Too Scared Heading Into Wednesday'

Investors continue to brace for volatility ahead of U.S. President Donald Trump’s tariff announcement this week. Fundstrat's Tom Lee believes bullish traders will get rewarded.

What To Know: Lee indicated that the stock market is showing signs of bottoming this week.

Lee noted Monday on CNBC’s “Squawk Box” that markets are oversold right now, and investors have already de-risked heavily ahead of Trump’s reciprocal tariff announcement on Wednesday.

“Post-Wednesday, I think markets are going to have some visibility. That allows us to take some of the selling pressure off,” Lee said on the show.

He told CNBC that with so many people thinking the economy could “completely fall off the rails” after Wednesday, markets could actually have the “right pieces” in place for a bottom following the tariff announcements.

Check This Out: Are We Heading Into A Bear Market?

The Trump administration’s tariffs have led to heightened concerns about stagflation, which is a period of slow economic growth paired with high inflation. Lee noted that there are a lot of “distortions” in the data as tariffs have caused a pull forward in demand in some categories.

“I think it’s possible economists are only dialing in the negative consequences so far, but not the positive … We might end up having better growth, so less stag, and maybe the inflation stuff is more distorting so it’s not as stagflationary,” Lee said.

“Not that I’m saying it’s going to [cause] a reversal of markets here, but I think investors are a little too scared heading into Wednesday.”

Lee told CNBC that he also believes the Federal Reserve appears more dovish than most expected. The Fed was not as hawkish as most were anticipating after the FOMC meeting earlier this month and Lee expects that to continue this week.

Fed Chair Jerome Powell is set to speak at the Society for Advancing Business Editing and Writing’s annual conference following Friday's nonfarm payrolls report. The Fed chair’s speech is expected to be focused on the economic outlook.

The S&P 500 officially fell into correction territory earlier this month. The SPDR S&P 500 SPY was last down 0.46% at $553.16 on Monday, but well off the lows of the session, according to data from Benzinga Pro.

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