Stocks are falling, yields are skyrocketing, and inflation is persistent. Yet Fundstrat’s Tom Lee remains bullish in his view that the stock market will soar into year-end.
In a Friday note, Lee stuck with his thesis that the S&P 500 could rally to Fundstrat’s year-end target of 5,100, representing a potential upside of 37% from current levels.
That’s despite the Fed’s Wednesday FOMC meeting, which resulted in another “jumbo” 75-basis-point interest rate hike, in addition to more hawkish hints from Fed Chair Jerome Powell. That commentary has led investors to expect even more rate hikes going into 2023, with a terminal fed funds rate of 4.6%.
Following the Fed’s most recent meeting, short-term treasury yields surged to their highest level since 2007, while stocks have shed about 4%.
“Our continuing analysis shows leading indicators point to disinflationary/deflation,” Lee said, highlighting an ongoing decline in the Manheim Used Vehicle Index, recent commentary from FedEx and Costco management teams about falling prices, and lower oil prices.