Hedge fund veteran Tom Lee remains bullish on the stock market despite its corrective moves to start the month of August.
In a new CNBC interview, the Fundstrat Global Advisors’ managing partner says this his company believes that equities are likely in the process of carving a bottom for the month.
Lee says that a few macro factors are starting to look favorable for the stock market.
“I think there are some constructive things that happened (on Friday) that make myself and Mark Newton, our head of technical strategy, think we’re actually in a bottoming possibly for the month of August.
The dollar reversed pretty sharply and yields turned down. As you know, both would be pretty big headwinds for stocks.
As we got into August, it’s been a pretty rough four days so far. But I think the jobs number was pretty decent. I am kind of optimistic that we get a good CPI (consumer price index) report (this) week so that’s a roadmap to seeing stocks do better (this) week.”
The CPI is typically used as a proxy to track inflation rates. Traders keep a close eye on the metric as it could potentially signal whether the Fed would continue to raise interest rates.
Lee also notes that institutional investors are quick to flip bearish on the stock market following the recent correction. According to the Fundstrat executive, the development suggests that the stock market is not yet euphoric as trillions of dollars are still waiting on the sidelines.
“I’m still pretty surprised how many of our institutional investor clients lean bearish. In the last four days, a lot of them have jumped on to bet against stocks rising. There are technical reasons to be a little bearish in August, but I think people are really quick to flip bearish here. That’s not a sign of an ebullient market. It’s a sign of people getting pulled in, and there’s still $5.5 trillion of cash waiting to get pulled in.”
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