Market strategist Tom Lee believes the U.S. stock market will enter bearish territory this year, but not before reaching a new record high.
В CNBC interview Lee predicted that after a year of trading in a narrow range, the S&P 500 index will continue to rise in the coming weeks. However, the expert believes that by the end of the year, the bears will fully emerge in the stock market.
We believe that a bear market occurs when markets fail to respond to positive news. Therefore, I believe we are in a cycle where a bear market is already occurring in the software space, as seen in Mag 7 (The Magnificent Seven stocks, including Apple, Amazon) and in cryptocurrencies.
Essentially, the current situation has already dispelled most of the speculation. Therefore, we would bet on markets rising through the end of the month, staying positive in March, and possibly reaching 7300. Later, we believe a bear market could emerge.
Assessing the dynamics of oil, Lee explained that price hikes are a bullish signal for the stock market.
First, the US is an oil exporter, so as an economy, we benefit net from higher oil prices. Second, other countries are oil importers. Therefore, not only does the US look better, but in terms of relative growth, it should outperform its competitors, which means capital flows back to the US.
Third, because we’re concerned about global growth for all the reasons you described, when growth is limited, people buy growth stocks. The US stock market is a growth index, so money from the rest of the world returns to the US.
At the time of writing, the S&P 500 (SPX) was trading at 6672, and the price of oil (WTI) was $95,63 per barrel.