Market Is Primed for a ‘Face Ripper’ Rally Thanks to Four Ingredients Says Tom Lee
Fundstrat head of analysis Tom Lee says the market is primed for a face-ripping rally into month finish. He named 4 particular elements behind the decision.
Lee, a CNBC contributor, joined Freedom Capital Markets’ Jay Woods as main indexes rebounded from final week’s selloff. Both agreed expertise shares are main the bounce, although they disagreed on how far it could run.
Four Ingredients Behind the Rally Call
Right earlier than his “face ripper” remark, Lee pointed to 4 particular components.
- Oil costs cooling over the weekend
- Treasury yields easing in line with oil
- A hawkish Fed that would nonetheless soften its stance
- Oversold situations throughout the broader market
Those 4 situations, Lee said, add up to a rally with actual momentum.
The Fed and Oil Give the Market Room to Breathe
Lee stated final week marked most ache, pushed by a hawkish Federal Reserve and elevated power costs.
Oil has since cooled, and Treasury yields have adopted it decrease, taking stress off threat property, he stated.
The aid follows the Fed’s rate hike from the prior week. The transfer had puzzled merchants when it failed to set off a broader selloff.
Lee argued the central financial institution may now soften its tone, given shifting inflation inputs like transport and power prices.
“I believe it’s all the elements for a face ripper, particularly given how oversold we’re.”
Tom Lee, CNBC
Chip Stocks Lead, But Woods Wants Broader Confirmation
The rally’s management sits in AI-linked chip names, together with AMD.
AMD’s transfer to a $1 trillion valuation displays investor urge for food for the commerce. Woods calls it a tease between bulls and bears on the S&P 500’s 7,600 stage.
Woods cautioned that power costs fell for just one session, and little else had essentially modified.
He expects chip and software program power to push the S&P 500 towards its prior high close to 7,800. Still, he doubts expertise alone can attain recent highs with out affirmation from Micron’s earnings subsequent week.
Lee countered that sentiment stays bearish beneath the floor. AI shares are nonetheless buying and selling beneath their June highs, and buyers have de-risked heading into the Fed choice.
He reiterated his S&P 500 target of 8,000 for this month. He famous that crypto’s rally in August typically leads inventory strikes by about a month.
The rally’s sturdiness could hinge on subsequent week’s earnings. Micron’s report will present whether or not chipmakers can broaden the features or the bounce stays slender.
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