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Fundstrat’s Tom Lee is bullish on the inventory market in 2024, however he does not count on shares to go up in a straight line.
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Lee warned that the inventory market is due for a sell-off within the first quarter of 2024.
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These are the 4 the explanation why Lee expects a inventory market pullback to happen inside the subsequent few months.
Fundstrat’s Tom Lee is without doubt one of the most bullish strategists on Wall Avenue for 2024, however he does not count on the inventory market to go up in a straight line.
Lee warned shoppers in a observe on Friday that the inventory market is due for a sell-off inside the first few months of 2024.
To be clear, Lee does count on the S&P 500 to rise to an all-time excessive throughout the month of January, and he expects good points within the inventory market to proceed over the following 12 months, with a 2024 year-end S&P 500 worth goal of 5,200.
“Reaching an all-time excessive is a major market milestone. And shares don’t abruptly reverse from there,” Lee stated.
However the inventory market hitting report highs in January will possible quickly be adopted by a pullback of about 5% someday in February or March, representing a interval of consolidation for the inventory market after it staged a 16% rally for the reason that finish of October.
“Within the present context, we might see S&P 500 4,400 to 4,500 as soon as we make all-time highs, or a modest pullback,” Lee warned. “That is in keeping with our 2024 12 months Forward Outlook, the place our base case is the S&P 500 makes most of its good points in [the] second half of 2024.”
Lee provided the next 4 the explanation why he expects shares to stage a pullback after January.
1. The market may very well be getting forward of the Federal Reserve by way of rate of interest cuts. Whereas the Fed expects solely three rate of interest cuts in 2024, the market is at present pricing in six rate of interest cuts subsequent 12 months. Any pullback in expectations of what number of instances the Fed cuts rates of interest subsequent 12 months might result in draw back volatility in shares.
2. “AI timeline may very well be pushed out attributable to a ‘systematic hack’ by malevolent AI,” Lee stated.
3. “Fairness markets must consolidate the parabolic good points from late 2023,” Lee stated.
4. “A drawdown in February/March timeframe is in keeping with election 12 months seasonal returns,” Lee stated.
Any dips within the inventory market subsequent 12 months ought to in the end be purchased, Fundstrat says, as technical strategist Mark Newton stated in a observe final week that trillions of {dollars} of money on the sidelines ought to present sufficient fireplace energy to make any dips in shares short-lived.
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