Veteran investor Tom Lee says investors are better off remaining bullish on markets despite the recent correction in equities and other risk assets.
In a new interview on CNBC, Fundstrat’s head of research says that the correction in equities – which saw the S&P 500 dip from above 6,000 to 5,832 – is likely an opportunity for investors to go long rather than stay cautious.
“This is another buying opportunity in our view. 2024 has proven to be a year where the market’s been strong and it has eluded many opportunities for sustained weakness. I know [December 18th’s] pullback was really painful, but to us, I think the fundamental supporting stocks are intact and I think it’s a good opportunity for investors here.”
Lee notes that the volatility index (VIX) – which measures the stock market’s expectation of volatility based on S&P 500 index options – rose sharply on December 18th. He says that historically, such a rapid rise has correlated with market bottoms.
“The market has been bleeding lower.
If you look at internals for the last ten days, [December 18th] looks capitulatory because not only did we have a 90% down day, but the VIX exploded by 75%. There are only four times in history where it’s risen 60% in a day, so [December 18th] was the fifth time in its 35-year history. Of those four times, the market recovered all of its losses within a week three out of the four times. The fourth time it took a month.
So I think what you had was people panicking to get out of a momentum trade that’s ending because we’re so close to year-end. But here’s the interesting thing. The forward VIX-futures curve barely moved. So it was almost as if people were seeking protection through the VIX on [December 18th].”
As of Friday’s close, the S&P 500 traded at 5,930 points.
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