Fundstrat’s Tom Lee says the stock market is headed for an “abrupt change in market conditions” later this year, even as he believes current conditions remain favorable for stocks.
Lee made the comments in a CNBC interview after the June 17 Federal Reserve meeting, where new Fed Chairman Kevin Warsh held his first press conference and dropped the central bank’s interest rate expectations.
According to Lee:
“We still believe there will be an abrupt change in market conditions later this year, one that looks very much like a bear market. But we don’t want to stand there and call it a top. I think conditions are still favorable for stocks.”
Lee said the S&P 500 is at 7,500 and pointed to SpaceX’s IPO as a sign that risk appetite remains intact, noting the company has a float of just $90 billion.
He outlines three forces that he expects will test markets later this year: research tied to the Fed’s new five-task force review process, additional stock unlocks from the IPOs of SpaceX, Anthropic and OpenAI, and supply chain shortages due to disruptions in the Strait of Hormuz.
A fourth catalyst, Lee says, would be the drying up of speculative capital, evidenced by excess margin debt or a flow of money to the sidelines.
Lee says he sees no signs yet that investors are optimistic enough to meet that fourth condition.
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