Fundstrat said the August stock sell-off is an ideal opportunity to buy on a pullback.
Markets will remain nervous about higher interest rates until the end of the month.
The Fed’s Jackson Hole seminar could put stocks back on an upward trajectory.
The market rout in August means investors are nearing the perfect opportunity to buy a dip in stocks before they resume their rally, according to Fundstrat research chief Tom Lee.
Lee, who predicted the benchmark would do so Notch set a record in 2023 At 4825, he warned that there is a possibility of further decline in the near term for stocks.
Already, the S&P 500 is down about 5% since the beginning of August. This sell-off was impacted by the weakness of the Chinese economy, as well as stronger-than-expected economic growth in the United States which sent bond yields higher. The Atlanta Federal Reserve estimates GDP growth of 5.8% in the third quarter.
Both of these factors can cause problems for stocks. China’s recession may pose indirect risks to the US, particularly for technology stocks with heavy operations in China. Meanwhile, a strong GDP indicates that the Fed may continue to raise interest rates in an effort to slow the economy, which is likely to affect asset prices. A strong economy is also pushing the timetable for any potential rate cuts, leaving the “higher for longer” narrative for interest rates intact.
“In short, the US inflation story is receding. Instead, the factors of rising interest rates, which are hurting the price-to-earnings multiple and the story of strengthening the US economy, which means risks of further hikes, are at the forefront of mind,” Lee said in a client note on Friday. .
Central bankers have already raised interest rates by 525 basis points to slow inflation, a move that still stands Help weight the S&P 500 down 20% in 2022. Meanwhile, markets are pricing in a 33% chance that the Fed will raise interest rates by another 25 basis points at its November policy meeting, according to CME FedWatch tool.
Lee warned that the downside could continue for the next five to 15 days, until around August 25, around the time of Chip maker Nvidia will report earnings In the second quarter of the year, central bankers will hold the Jackson Hole Symposium, where Powell is expected to deliver remarks on the US economy. The escape is the perfect moment for investors to get into the market before those events, which could lead to a resurgence in the year-to-date rally.
“We see this more as ‘August’ than the start of a bigger road,” Lee said, referring to the fact that stocks typically struggle during this month of the year. “We don’t think the market outlook has changed to the end of the year 2023. In fact, this will ultimately prove to be a great buying opportunity.
Lee is one of the most bullish stock market forecasters on Wall Street, with the S&P 500’s year-end target for the benchmark index set to rise 10%. Meanwhile, other economists warned Stocks may be overpriced At current prices, which increases the odds of an in-store correction to the benchmark.
Read the original article at Business interested