Veteran investor Tom Lee says investors will be better off if they remain bullish on the markets despite the recent correction in stocks and other risky assets.
In a new interview on CNBC, Fundstrat’s head of research says the stock correction — which saw the S&P 500 fall from above 6,000 to 5,832 — is likely an opportunity for investors to go long rather than remain cautious.
“In our view, this is another buying opportunity. 2024 has proven to be a year in which the market has been strong and in which many opportunities for continued weakness have been missed. I know [December 18th’s] The pullback was very painful, but for us I think the fundamental support stocks are intact and I think this is a good opportunity for investors here.”
Lee notes that the volatility index (VIX) – which measures the stock market’s volatility expectations based on the S&P 500 index options – rose sharply on December 18. He says such a rapid rise has historically been correlated with market bottoms.
“The market bled lower.
If you look at the internal data for the last ten days, [December 18th] looks capitulating as not only did we have a 90% drop day, but the VIX exploded 75%. So there are only four times in history that the price has risen by 60% in one day [December 18th] was the fifth time in its 35-year history. Three out of four of those four times, the market was able to recover all its losses within a week. The fourth time it took a month.
So I think you had people panicking to get out of a momentum trade that’s coming to an end because we’re so close to the end of the year. But here’s the interesting thing. The forward VIX futures curve barely moved. So it was almost like people were seeking protection through the VIX [December 18th].”
At Friday’s close, the S&P 500 was trading at 5,930.
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