Investors are set to reap gains this month, albeit for a short period of time, said long-time market bull Tom Lee. Lee predicted that the S&P 500 index will rise more than 100 points in September, but will see a 10 percent correction in the following month.
“We could have a really strong rally in September,” Lee, co-founder and head of research at Fundstrat Global Advisors told CNBC on September 3.
According to Lee, uncertainty due to the pandemic and the growing risks on the fiscal and monetary policy front are the reasons behind the vulnerability.
“Part of it has to do with the fear that had built in the last eight weeks around the Delta variant and the glumness developing around the economy and that led to both retail and institutional investors raising quite a lot of cash,” he said.
He predicted that the S&P 500 will soar to above 4,650 points. “The US is still in an underlying expansion,” he said, citing the comeback on crude oil prices and Bitcoin trading above $50,000.
On the Fed’s policy, Lee said policymakers are likely to stay dovish for longer, keeping a watch on the path of the Delta variant and its economic impact.
However, the rise in September will be short-lived. “We didn’t think there was a window for a 10 percent correction for most of 2021. The window where we think you could start to have potentially a 10 percent pullback is October,” he said.
In October, the markets would be closer to tapering. “For Washington, that’s when the debt ceiling rhetoric comes back, and if there are going to be concerns about the debt ceiling, the bond market could panic,” the market bull said, adding that this would spill on to the stock market as well.
“The markets can alarm everybody because we are already up 20 percent year-to-date and we are still in the pandemic. But the underlying fundamentals are still very strong and there is a lot of pent-up demand,” Lee had told CNBC earlier.
Lee sees opportunities of investment in Facebook, Amazon, Apple, Netflix and Alphabet.
(Edited by : Shoma Bhattacharjee)