Tyler Le/BI
Fundstrat’s Tom Lee advises buying the ongoing dip in stocks despite troubling economic data.
Tech stocks have stumbled recently due to disappointing earnings and chip sector volatility.
Lee says upcoming Fed guidance and potential rate cuts could shift markets in a positive direction.
It’s a prime time for investors to buy the dip in stocks, with the market flashing a handful of signs that there’s more upside on the way, according to Fundstrat’s head of research Tom Lee.
The ultra-bullish analyst, who’s previously predicted the S&P 500 could nearly triple by the end of the decade, says the ongoing tech-driven stock sell-off is actually a buying opportunity.
It’s a bold short-term call given recent wreckage in the market. The tech-heavy Nasdaq 100 has lost nearly 5% in just two days amid disappointing earnings reports and volatility in the chip sector.
Lee says the sell-off has likely been fueled by a culmination of factors, such as uncertainty surrounding the presidential election, lingering geopolitical tensions, and ongoing concerns over a recession.
But there are signs that the sell-off will ultimately be limited, according to Mark Newton, the firm’s head of strategy.
“Overall it’s still tough for me to put too much credit into Thursday’s price action as to having ‘changed the trend’ or ‘broken any trend’ and uptrends remain intact,” Newton said, noting a technical support level of 5,390 for the S&P 500. “I’m willing to bet that Technology is also bottoming, and I cannot get too negative following this pullback.”
Lee also outlined four reasons why markets were likely experiencing a “normal pullback,” as opposed to investors panicking over the risk of a potential recession.
1. Stocks have a number of catalysts ahead
Central bankers are expected to deliver more guidance on rate cuts in the weeks following their last policy meeting. That could shift markets in a more positive direction, Lee said, if Fed officials hint a rate cut is coming soon.
July’s inflation reading, meanwhile, is set for release on August 11. Cooling inflation could also bolster confidence…
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