Tom Lee Is Bullish on Stocks, But Braced for a Margin Debt Drop
Fundstrat’s Tom Lee reiterated his name for the S&P 500 to succeed in 8,000 by the top of August. He additionally repeated his warning that shares are due for a pullback.
Speaking on CNBC, Lee joined Robinhood’s Stephanie Guild and Payne Capital’s Courtney Garcia. He stated each views can maintain on the similar time.
A Bull Case Built on Earnings
Lee based his goal on rising 2027 earnings estimates. He put the present determine close to $410 per share, up from about $395 at first of earnings season. Lee stated the estimate may attain $425 by the top of the month.
Applying a value to earnings a number of of 20 to that determine would put the index near 9,000, Lee stated.
Courtney Garcia pointed to a broader pattern supporting the rally. She famous that healthcare, financials, and industrials have all outperformed the S&P 500 over the previous three months.
That breadth issues as a result of the positive aspects not rely on a handful of enormous know-how names. Garcia added that the rally can proceed if earnings and shopper spending hold holding up.
Four Risks Lee Is Watching
Lee named particular causes a 10% pullback may nonetheless hit as soon as the market reaches his 8,000 goal. He pointed to record margin debt levels and an unresolved response to Fed Chair Kevin Warsh’s new inflation framework. He additionally flagged midterm election uncertainty and additional inventory unlocks at SpaceX.
That SpaceX concern comes whilst SpaceX short interest has already dropped since its personal lockup expired earlier this month.
“I believe pullbacks happen after we’re least anticipating it, you already know, and often when buyers are bullish.”
Lee made a comparable S&P 500 name earlier this month. He first flagged the same 8,000 target in early August, alongside a separate name on Ethereum.
He in contrast the present setup to 1998, when shares saved climbing after the Long-Term Capital Management collapse. That rally lasted one other 18 months and added 35%, he stated.
Valuations have cooled by two full turns since March, whilst earnings development greater than doubled. Lee referred to as that mixture a signal of wholesome skepticism moderately than exhaustion.
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