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The S&P 500 is primed to rise 4% in June, according to Fundstrat’s Tom Lee.
Lee highlighted five catalysts that could drive the stock market higher next month.
“We see positive supports for stocks in June, hence, buy the dip (if it comes),” Lee said.
The stock market is poised to rise another 4% in June after jumping 5% in May, according to a Tuesday note from Fundstrat’s Tom Lee.
Lee said the S&P 500 could jump to 5,500 within the next month, driven by five positive market catalysts.
“We see positive supports for stocks in June, hence, buy the dip (if it comes),” Lee said.
The first catalyst is bullish seasonals. Since 1927, there have been 17 instances when stocks were up in the first quarter of the year and then saw a decline in April. This setup, which has happened already this year, bodes well for strong gains in May and June.
Lee highlighted that the win ratio of stocks rising in June is 100%, with a median gain of 3.9%. Such a gain would send the S&P 500 to new all-time highs.
“The seasonal argument alone is positive,” Lee said. “That’s why we think there’s still gas in the tank.”
The second catalyst is inflation, or rather continued disinflation, according to Lee, who is expecting several favorable inflation data points over the next few weeks. That starts with Friday’s release of April Core PCE, followed by the release of May CPI on June 12.
A continued decline in used car prices, a surge in new car inventories, and declining trends in owners’ equivalent rent all give Lee confidence that inflation should continue to move lower. If that does happen, the likelihood of rate cuts should rise in the second half of the year.
“I think the odds of the number of Fed cuts by the end of the year is actually going to start creeping up again,” Lee said.
The market currently expects just one interest rate cut in 2024, and if more rate cuts begin to get priced into the market, that should act as a tailwind for stocks.
The third catalyst is investors’ low utilization of leverage, which suggests the type of euphoria often seen at market peaks is nowhere…
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