Fundstrat Tom Lee’s research says that the stock market is in the middle of a “most hated” rally, where skeptical investors cling to reasons why the market should fall.
In a new one updateLee says he believes that the current increase, which has increased the S&P 500 by 17% from recent lows to within 3% of all time, reflects a powerful but undervalued rally.
‘Part of this [bearish sentiment] is understandable. We had a Black Swan event on Post-Tariff Liberation Day, which means an unexpected event, and we had a decrease of 20% in shares in a very short period. “
As for what comes, Lee points to historical patterns where doubts led to large meetings after a market dump.
“When the shares started collecting after March 2020, many fund managers said that we are still in a bear market.
And recall in the fall of 2022 After the markets made its low in October 2022, many investors said this was just a bear market trally and investors are about to make a mistake …
But here is the reality investors run bullish as soon as you make a record high. In other words, investors generally fight after a decline. They will fight against the rally until you make a new of all time. With a new high they turn around and they become bullish and I think that will happen as soon as the markets are a new of all time. “
Lee says that Bitcoin’s recent all-time high above $ 111,000 is a different leading indicator for the S&P, because Bitcoin peaked about a month before the S&P and they both follow an elevated global liquidity.
Regarding Moody’s downgrade of the US government debt from AAA to AA1, Lee says that he is in doubt that it is a negative signal for markets, and notes that S&P first reduced the US in 2011 and Fitch followed in 2023.
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