Market strategist Tom Lee thinks the US stock market will enter bear territory this year, but not before rising to a new all-time high.
In a new CNBC interview, Lee predicts the S&P 500 will continue to rise in the coming weeks after trading largely within a narrow range so far this year.
But Lee warns that stock market bears are likely to come out in full force by the end of the year.
“Our assessment is that we expect that drop to happen if the markets don’t react to good news. So I think we’re in a period where we already had a bear market in software, the Mag 7 and in crypto.
I think this has already cleared up a lot of speculation. So for me, I think our bet would be that the markets will actually rise through the end of the month, that we will actually be positive for March and maybe get to 7,300. Later in the year we think a bear market could emerge.”
Looking at oil, Lee explains why price spikes are bullish for the stock market.
“First, the US is an oil exporter, so as an economy we benefit from higher oil production [prices]. The second is that other countries are importers. So not only does the US look better, but it should also perform better on a relative growth basis, meaning flows back into the US are happening. And the third is that because we worry about global growth for all the reasons you described, people buy growth stocks when growth is scarce. The American stock market is a growth index and therefore comes back to the US from the rest of the world.
So I think it’s a rotation story.”
At the time of writing, the S&P 500 (SPX) is trading at 6,672, while oil (WTI) is worth $95.63 per barrel.
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