Is a 'buy the dip' opportunity near? A famous Wall Street bull predicts US stocks will fall 7% to 10%

Tom Lee, managing partner and research director at Fundstrat Global Advisors, expects a 7% to 10% pullback in the US stock market over the next two months, which he says will provide investors with an opportunity to "buy the dip".

"Right now, there's more concern about the economy, so the jobs report and the unemployment claims data seem to have caused a bigger market reaction. I think that's going to be the case in September as well," Lee said.

Lee said the August non-farm payrolls report, due out on Friday at 8:30am Eastern Time, is expected to show a "pretty good rebound" in job growth, but added: "I hope it's not too strong, because if it's too strong, people will start to worry that the Fed doesn't want to start the rate cut cycle in September."

The August jobs report, which will help clarify the size of the Fed's rate cut in September, is expected to show further softening in the labour market, which could open the door to a more aggressive 50bp cut. The PCE inflation data released last week suggested the Fed will maintain its path of three 25bp cuts this year, but if the jobs data show further weakness in the labour market, investors are not ruling out a more aggressive 50bp cut.

Lee, who is usually known for his bullish views, has become more cautious after successfully predicting the stock market rebound last year. However, he added that the potential market decline would provide investors with a "buy the dip" opportunity. "I think people are going to have an opportunity to buy stocks over the next eight weeks, so I think it's good to be cautious but also be ready to take advantage of that opportunity," he said.

US stocks plunged on Tuesday after the Labor Day holiday. The Dow Jones Industrial Average fell 1.51 per cent, according to FactSet; the Nasdaq Composite Index plunged 3.26 per cent, its worst day since August 5, when global stocks plunged; and the S&P 500 index fell 2.12 per cent. The data showed US August Markit manufacturing PMI final value fell and US August ISM manufacturing index missed economists' expectations.