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Investors shouldn’t rush to buy the latest dip in the stock market, says Fundstrat’s Tom Lee.
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That’s because volatility is increasing, which could put pressure on stocks in the short term.
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It could take less than a month for the market to bottom out, Lee predicted.
Don’t buy the dip in stocks yet: There’s a selloff that could send the market to a bottom in the coming weeks, according to one of Wall Street’s biggest bulls.
Tom Lee, Fundstrat’s head of research and one of this year’s most bullish stock forecasters, issued a warning to investors looking for opportunities amid the market sell-off. Stocks have slumped after the high March inflation report, escalating tensions in the Middle East and aggressive Fed rate-cutting guidance, sending the S&P 500 to four straight days of losses.
But opportunistic investors shouldn’t rush into stocks just yet, Lee said, pointing to a rise in the VIX, the market’s volatility gauge. Higher volatility tends to lead to selling among investors, he warned, which could put pressure on stocks in the short term.
“While we normally like to buy dips, as we said earlier this week, the rise in the VIX tells us to buy the dip extra slowly,” Lee said in a video sent to clients on Thursday.
A buying opportunity could present itself soon as the market is poised to decline, Lee said. This is largely because the positive catalysts for equities are still in play, such as strong corporate earnings growth. According to FactSet estimates, the S&P 500 is on track to report first-quarter earnings growth of more than 7%.
The Fed also appears poised to cut rates sometime this year, although rate cuts could be delayed further than investors expect. According to CME’s FedWatch tool, markets are now pricing in one or two rate cuts by December.
Lee predicted that markets could bottom within the next month or possibly sooner, assuming the conflict in the Middle East does not escalate further, volatility subsides and investors show signs of slowing their selling pace.
“I think this pullback is very good because it provides good entry points,” Lee said. “All the things that support the supplies are still there.”
Lee predicted that the S&P 500 could reach 5,200 by the end of the year, but noted that at best the index could reach 5,500 or higher. He was spot-on in his 2023 stock forecast, rightly citing a 20% gain in the benchmark index.
Read the original article on Business Insider
