Tom Lee, head of research at Fundstrat Global Advisors, believes that the stock market is a buy. He says that a lot of bad news is already priced in. This positions the market for a big rally in the coming months.
“I am optimistic. I can understand why investors are cautious—they’re uncertain about the severity and duration of tariffs,” Lee said on Wednesday. “But now, we’re witnessing a significant price correction and a decline in sentiment.
For example, today’s market reaction to a disappointing ADP jobs report was positive, indicating that bad news is already priced in.”
Lee suggested that the coming months—March, April, and May—could see big gains. Stocks could rally by 10% to 15%. This comes after a period Lee describes as a bear market in terms of sentiment.
It also follows a recalibration of the momentum trade.
Lee foresees significant market gains
This week, all three major averages dropped by more than 1%.
President Donald Trump’s tariffs, coupled with retaliatory tariffs on U.S. goods, dampened investor sentiment. It also lowered expectations for future profits. The S&P 500 is down 1.5% for the year.
The Nasdaq Composite briefly entered a 10% correction from its recent high. Despite the downturn, Lee remains a buyer. On Wednesday, the major indices bounced back from a two-day decline.
They were buoyed by White House concessions to automakers, which lifted investor spirits. “We already know stocks will bottom before bad news peaks,” Lee remarked. “So, if the market doesn’t drop on bad news, it means we’ve already priced in many risks that would typically induce fear.”
This cautiously optimistic outlook comes at a time of market volatility.
Investors are closely monitoring economic indicators and political developments.