Tariff War Resolution Could Spark 20% Market Recovery Rally

Tom Lee, the head of research at Fundstrat, has suggested that the resolution of President Trump’s tariff war could pave the way for a significant recovery rally in financial markets. In a recent interview, Lee argued that the potential impact of tariffs on the financial landscape has already been largely felt, implying that the worst of the damage has already occurred.

Lee drew a parallel to the stock market correction of 1962 during the Cuban Missile Crisis, noting that markets bottomed out before the actual resolution of the crisis. He believes that a similar pattern could emerge today, with markets potentially recovering before the tariff issue is fully resolved. Lee’s optimism stems from the belief that a mutually agreed-upon or reciprocal tariff deal could be beneficial for businesses, setting the stage for a much larger recovery rally than currently anticipated.

Lee also highlighted the historical tendency of markets to bottom out before significant events, using the Cuban Missile Crisis as an example. During that 12-day crisis, the stock market bottomed seven days in, recovering two-thirds of its losses before the resolution. Lee suggested that this historical precedent could serve as a template for the current situation, indicating that markets might already be on the path to recovery.

Lee’s comments come at a time when investors are grappling with market volatility and uncertainty surrounding the tariff situation. He advised investors to remain patient, as the market may have already priced in the potential negative impacts of the tariffs. Lee’s outlook suggests that a resolution to the tariff war could lead to a more positive market environment, potentially driving a significant recovery rally.