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Traders should not rush to purchase the most recent dip within the inventory market, Fundstrat’s Tom Lee stated.
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That is as a result of volatility is rising, which might deliver 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 certainly one of Wall Avenue’s greatest bulls.
Tom Lee, Fundstrat’s head of analysis and one of many most bullish inventory forecasters this yr, issued a phrase of warning for traders 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 steerage on Fed charge cuts, inflicting the S&P 500 to notch 4 straight days of losses.
However opportunistic traders should not rush into shares simply but, Lee stated, pointing to a surge within the VIX, the market’s volatility gauge. Increased volatility usually triggers promoting amongst traders, he warned, which might result in near-term strain for shares.
“Whereas we usually like to purchase dips, as we stated earlier this week, the surge within the VIX says we gotta take shopping for the dip additional slowly,” Lee stated in a video despatched to purchasers on Thursday.
A shopping for alternative might come quickly, because the market seems poised to backside, Lee stated. 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 charge cuts might be delayed additional than traders predict. Markets at the moment are pricing in a single or two charge cuts by December, based on the CME FedWatch device.
Lee predicted markets might hit a trough throughout the subsequent month or presumably sooner, assuming that Center East battle doesn’t escalate additional, volatility eases, and traders 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 stated. “All of the issues which are supporting shares are nonetheless in place.”
Lee predicted the S&P 500 might hit 5,200 by the top of the yr, however has famous the index might notch 5,500 or increased within the best-case state of affairs. He was spot-on in his 2023 inventory forecast, appropriately calling a 20% achieve within the benchmark index.
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