Tom Lee, the head of research at Fundstrat, has advised investors to consider purchasing stocks this month, citing a forthcoming significant decline in inflation.
What Happened: Lee highlighted that the recent inflation figures for March have been higher than expected for the third consecutive month, in a conversation with CNBC on Monday.
However, he attributed the elevated readings to delays in official statistics, pointing out that real-time home and rent prices are stabilizing.
These real-time price drops will eventually be reflected in the official inflation report, which Lee believes will be bullish for stocks. A decrease in price growth will provide the Federal Reserve with more flexibility to cut interest rates and adjust its monetary policy.
“I think inflation is going to cool pretty dramatically. I don’t know when, but it’ll be sometime in the second half of this year,” Lee predicted.
Lee also suggested that the Fed might succumb to pressure to cut interest rates, especially considering the potential negative impact of maintaining high rates for an extended period.
Lee, who is among the most bullish Wall Street forecasters in 2024, previously forecasted that the S&P 500 could rise as high as 5,500 by the end of the year, indicating a further 6% gain for the benchmark index.
Why It Matters: The stock market has been showing signs of resilience despite concerns over inflation and interest rates. The traditional Wall Street adage “sell in May and go away” may not hold water this year, as analysts debunk the myth with strong evidence of positive stock market performance during the historically weak May-October period.
Other experts, such as veteran Wall Street investor Ed Yardeni, have also expressed confidence in the market’s continued growth potential, citing a less aggressive approach by the Federal Reserve and a positive earnings season.
The global economy is also showing signs of resilience, with the Organization for Economic Cooperation and Development revising its 2024 growth forecast upwards, indicating a potential escape from a stagflationary rut.
However, concerns over inflation and interest rates persist, with the U.S. economy facing a potential stagflation threat due to slower-than-expected growth and higher-than-expected inflation.
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