Tom Lee, managing partner of Fundstrat Global Advisors, thinks the US Federal Reserve is done raising benchmark rates.
In a new interview with CNBC, Lee say he is optimistic about the market and inflation figures.
“I think [last week’s] The CPI (consumer price index) report more or less shows that inflation is on a lower glide path. The things that are still inflationary — like car insurance, auto repairs — aren’t things that the Fed is necessarily trying to target with higher rates, but it’s more of a supply chain feed-through.
So I think we could see core CPI at 0.2 or less for the next three months. That would really make the Fed breathe easier, which is why I think the last hike was in July.”
The consumer price index (CPI) is generally used as a proxy to track inflation rates. Traders are keeping a close eye on the statistic as it could potentially signal whether the Fed will continue to raise interest rates.
Last week’s CPI report indicated consumer prices rose 0.2% in July, the White House reports described as “according to market expectations”.
However, Lee notes that many stock traders do not share his optimism.
“I don’t think people are even that optimistic. I mean this week everyone turned bearish fast. You just have to look at many people’s comments and they are already back in hard landing camp…
Yet we know that investors have pulled $115 billion from the stock market this year and there’s $500 trillion in cash, and mortgage rates could fall quite dramatically. When the Fed is ready and the [US 10-year treasury note] stays with [4%], mortgages should fall to 5.5%. That would be a huge boost next year.”
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