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Buyers should not rush to purchase the most recent dip within the inventory market, Fundstrat’s Tom Lee mentioned.
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That is as a result of volatility is rising, which may carry near-term strain to shares.
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The market might be lower than a month away from hitting a backside, Lee predicted.
Do not buy the dip in shares simply but — there is a wave of promoting that would see the market backside out within the coming weeks, based on considered one of Wall Road’s greatest bulls.
Tom Lee, Fundstrat’s head of analysis and one of the crucial bullish inventory forecasters this yr, issued a phrase of warning for buyers searching for alternatives amid the market sell-off. Shares have slumped after taking in a sizzling inflation report for March, escalating tensions within the Center East, and hawkish steering on Fed price cuts, inflicting the S&P 500 to notch 4 straight days of losses.
However opportunistic buyers should not rush into shares simply but, Lee mentioned, pointing to a surge within the VIX, the market’s volatility gauge. Larger volatility usually triggers promoting amongst buyers, he warned, which may result in near-term strain for shares.
“Whereas we usually like to purchase dips, as we mentioned earlier this week, the surge within the VIX says we gotta take shopping for the dip additional slowly,” Lee mentioned in a video despatched to purchasers on Thursday.
A shopping for alternative may come quickly, because the market seems poised to backside, Lee mentioned. That is largely as a result of the constructive catalysts for shares are nonetheless in play, like sturdy company earnings progress. The S&P 500 is on monitor to report earnings progress of over 7% for the primary quarter, per estimates from FactSet.
The Fed additionally seems poised to chop rates of interest someday this yr, even when price cuts might be delayed additional than buyers expect. Markets at the moment are pricing in a single or two price cuts by December, based on the CME FedWatch device.
Lee predicted markets may hit a trough inside the subsequent month or probably sooner, assuming that Center East battle doesn’t escalate additional, volatility eases, and buyers present indicators that they are slowing their tempo of promoting.
“This pullback, I feel, is superb as a result of it is offering good entry factors,” Lee mentioned. “All of the issues which can be supporting shares are nonetheless in place.”
Lee predicted the S&P 500 may hit 5,200 by the tip of the yr, however has famous the index may notch 5,500 or larger within the best-case situation. He was spot-on in his 2023 inventory forecast, accurately calling a 20% acquire within the benchmark index.
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