The head of research at market research firm FundStrat says the stock market most likely has more room to move higher.
In a new interview with CNBC Television, FundStrat’s Tom Lee say it is still too early to say that the stock market is in a bubble as there is no consensus yet that it is not.
“I don’t think we will have a bubble until the consensus declares that there is no bubble and there is no risk, and then we will probably be in a bubble. But I think a lot of people raising the prospect that this is a bubble means it’s still early days.”
If the Federal Reserve does not cut interest rates, Lee said it would threaten the strength of the stock market. However, Lee says it is more likely than expected that we will see rate cuts as early as March.
“If the Fed doesn’t cut spending, I think it poses a big risk to the stock market. I don’t think the Fed will hesitate just because the stock market has gone up…
The Fed’s policy rate of almost 5.5% is the highest policy rate in the world for any developed country… I think the bond market itself is telling us that the Fed is too restrictive right now…
I think the likelihood of cuts in March is greater than what is priced in and a lot of that will depend on what February’s CPI (consumer price index) looks like, which comes out on March 12, but we think there are some anomalies in the month January CPI, including poor seasonal adjustment…
If these start to show improvements, I think regardless of the high CPI we saw in January, the repricing will reverse to a large extent.”
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