Fundstrat Global Advisors’ managing partner Tom Lee thinks the terrible macroeconomic conditions of 2022 are “unlikely to persist” next year.
In a new Twitter thread, Lee says that he thinks inflation is falling faster than the markets and the Federal Reserve expect.
The CNBC contributor also notes the Fed likes to see a strong labor market.
“Reminder, many inflation drivers have literally imploded and down/flat for 2022 after surging mid-year. One doesn’t have to look far to see progress.
While wages matter, the Fed doesn’t want to crush the economy and doesn’t necessarily want to crush jobs.”
Lee also says stocks tend to bounce back after down years.
“Unless the inflation crisis persists, financial conditions will ease. This means stocks rise, and stocks rarely post back-to-back annual declines In fact, three of the five best-ever annual gains came after a ‘negative’ year…
And it still puzzles me why the US is the worst-performing global stock market in 2022 outside of China-zone-ish countries. Why is Europe outperforming when Europe is in the teeth of an energy crunch/inflation spiral?”
Lee points to a stat shared by Matt Cerminaro, a research associate at Fundstrat. Cerminaro notes that there have been only three years in the past 50 (1974, 2002 and 2008) when the S&P 500 has had as many -1% days as 2022.
The years following 1974, 2002 and 2008 all witnessed at least 23% gains, according to Cerminaro.
“Investors have had a painful year.
S&P 500 in 2022 has had 63 -1% days. Ouch.
In the past 50 years, there have only been 3 years with as many days down -1%:
1974: n= 67
2002: n= 73
2008: n= 75
Returns in following Year:
1975: 32%
2003: 26%
2009: 23%
2023: ?”
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