Fundstrat Global Advisors managing partner Tom Lee thinks the U.S. Federal Reserve is done raising its benchmark interest rate.
In a new interview with CNBC, Lee says that’s he optimistic about the market and inflation numbers.
“I think [last week’s] CPI (consumer price index) report kind of shows that inflation’s on a glide path lower. The things that are still inflationary – like auto insurance, motor vehicle repair – aren’t things the Fed’s necessarily trying to target with higher rates, but it’s more of a supply-chain work-through.
So I think over the next three months, we could see core CPI at 0.2 or less. That would really allow the Fed to breathe easier, and that’s why I think the last hike was July.”
The Consumer Price Index (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, however, notes that many stock market traders do not share his optimism.
“I don’t think people are even that bullish. I mean this week everyone’s been quick to turn bearish. One just has to look at the comments from a lot of folks and they’re already back in the hard landing camp…
Yet we know investors pulled $115 billion out of the stock market this year and there’s $500 trillion in cash, and mortgage rates could drop pretty dramatically. If the Fed is done and the [US 10-year treasury note] stays at [4%], mortgages should drop to 5.5%. That’d be hugely stimulative next year.”
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