Fundstrat's Lee Sees 6% S&P 500 Stocks Above 50-Day Average, Predicts Bull Cycle

Fundstrat’s chief investment officer, Tom Lee, has expressed his confidence that the US stock market is still in the midst of a bull cycle, despite recent price corrections. In a recent video update for investors, Lee stated that he believes the S&P 500 has already reached its lowest point for the year, although he is uncertain whether the market will experience a quick V-shaped recovery similar to 2020 or a more prolonged consolidation phase akin to 2011.

Lee’s optimism is based on the interpretation of several key risks, including tariffs and inflation expectations, which he believes will significantly influence the market’s next move. He acknowledges that investors are concerned about potential escalations in the tariff war with China, which could lead to a global recession. Additionally, there are worries about a financial crisis resulting from deleveraging and the possibility of inflation expectations surging to levels that could force the Federal Reserve to raise interest rates.

Lee shared a chart indicating that only 6% of stocks in the S&P 500 are above their 50-day moving average, and just 19% are above their 200-day moving average. Historically, such a setup has had high win rates for bulls. Lee pointed out that over the past 16 years, the S&P 500 has been higher six months and 12 months later when the percentage of stocks above their 50-day and 200-day moving averages was below 20%. This historical data supports his belief that the market has made a structural low.

Lee’s analysis suggests that the current market conditions, while challenging, present an opportunity for investors. His confidence in the market’s resilience is based on historical data and the interpretation of current risks. However, he cautions that the market’s next move will depend on how investors perceive and react to these risks. Lee’s insights provide a nuanced view of the current market landscape, highlighting both the potential for recovery and the need for caution.