Fundstrat’s Tom Lee says the stock market is headed toward a “sudden change in market conditions” later this year, even as he believes current conditions are still favorable for stocks.
He made it for me comments In an interview with CNBC following the Fed’s June 17 meeting, new Fed Chairman Kevin Warsh held his first news conference and dropped the central bank’s forward guidance on interest rates.
According to me:
“We still believe that later this year there will be a sudden change in market conditions, which looks very much like a bear market. But we don’t want to stand up and call a top. I think conditions are still favorable for stocks.”
Lee said the S&P 500 is at 7,500 and pointed to SpaceX’s IPO as a sign that risk appetite remains intact, noting that the company only has a $90 billion float.
He identifies three forces that he expects to test markets later in the year: scrutiny related to the Federal Reserve’s new five-member staff review process, the opening of additional shares from the initial public offerings of SpaceX, Anthropic, and OpenAI, and supply chain shortages caused by disruptions in the Strait of Hormuz.
A fourth catalyst, Lee says, will be a drying up of speculative capital, evidenced by extended debt margins or a rush of cash to the margins.
Lee says he sees no signs that investors are optimistic enough yet to meet this fourth condition.
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