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According to Fundstrat’s Tom Lee, stock prices could fall by as much as 10% in the next eight weeks.
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He told CNBC that investors should be cautious ahead of the Fed’s rate cuts and the election.
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According to Lee, the sell-off is an ideal time to buy stocks when prices are falling.
Stocks could face a potential double-digit decline over the next eight weeks as a series of market-moving events temporarily challenge this year’s gains, Fundstrat’s Tom Lee told CNBC.
Lee predicts the market could fall 7% to 10% and advises investors to prepare for greater turbulence.
“I think investors should be cautious about the next eight weeks,” said the usually bullish investor. “The market has been up seven out of eight months this year. So we know it’s an incredibly strong market. But we also have the September cuts and the election, things that make people nervous.”
That’s partly a reference to the Federal Reserve’s upcoming policy meeting in mid-September, at which the central bank is expected to cut rates by at least 25 basis points.
Analysts have separately indicated that the market may not welcome deeper cuts. Bank of America wrote Tuesday that if the Fed were to cut 50 basis points instead, it would likely be in response to heightened recession risk.
Friday’s jobs report will inform the Fed’s decision later this month, with some on Wall Street worried it could be weaker than expected. But Lee signaled that a pullback could follow even if it beats forecasts as investors adjust their interest rate outlooks.
“If it’s too strong and investors are worried and the stock market goes down on Friday, I would buy that drop,” he told the newspaper.
Lee has been largely correct in his 2024 stock market predictions, entering the year as one of Wall Street’s bullish forecasters. His optimism has been met with an 18% gain for the S&P 500 through Friday.
Meanwhile, the uncertainty surrounding the election could spook investors until the results are known, experts told Business Insider.
Even outside of an election year, September is a challenging month for stocks in a non-election year. But when voters head to the polls, seasonal volatility can extend into mid-October, SoFi’s Liz Young Thomas told the outlet.
There is one silver lining: Investors can expect some relief once a president is elected, she said.
Lee also indicated that the coming “difficult” weeks should be seen as a buying opportunity.
“I think people will have an opportunity to buy in the next eight weeks,” he told CNBC. “I think it’s good to be cautious, but just be ready to buy that dip.”
The strategist is one of the market’s most steadfast bulls. In June, he argued that the S&P 500 could triple this decade and reach 15,000 by 2030.
Read the original article on Business Insider
