Tom Lee, co-founder and managing partner of Fundstrat, says the broader stock market could face several major challenges over the next few months, even as he remains optimistic about the long-term outlook for artificial intelligence and technology stocks.
In a new interview with CNBC, Lee said He says Investors are likely to focus on how the Fed responds to inflation risks, rising yields, and a wave of upcoming initial public offerings (IPOs).
“I think there are three tests that are emerging for the stock market. The first is of course how the Fed will react to underlying inflation risks. The second is that the market doesn’t really like when inflation is a concern and yields are rising and I think we’re seeing that now in the PPI.
I think there’s a lot of inflation ahead, not structural but just an inflation shock but also energy shortages. And the third of course is that I think we have too much IPO and that’s too much supply.
So I think we’ll face some tests later this summer. So I think the risk-reward ratio is still great for technology, but I’m not sure about the broader market.
Lee says he remains optimistic about the technology in the long term because of the U.S. leadership in artificial intelligence, but warns that inflation concerns, rising yields and a market oversupply of initial public offerings could create pressure on the broader stock market in the coming months.
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