- Tom Lee sees the stock market and macro environment improving since April 7, with moderated tariff fears, stronger credit markets, and a calming VIX, projecting the S&P 500 (^GSPC) could reach 5,800 soon.
- Despite challenges to hitting new all-time highs, Lee remains optimistic for 2025, citing corporate resilience and potential deregulation, even if tariffs become permanent.
- Lee suggests inflation is weaker than expected, driven by low oil prices and a softening labor market, arguing the Fed could cut rates now, as its core inflation is lower than Europe’s when excluding shelter.
Tom Lee, Fundstrat’s co-founder and head of research, shared his insights on CNBC’s “Squawk Box,” discussing recent market trends, volatility, and the Federal Reserve’s upcoming interest rate decision. Reflecting on the market’s trajectory, Lee noted that the S&P 500 (^GSPC), which hit his predicted target of 5,500, followed a period of heightened tariff-related fears that peaked around April 7. He believes the macro environment and stock market are in a stronger position now, driven by moderated tariff expectations, improved conditions in leading indicators like credit markets, high yield bonds, and the VIX, which is signaling reduced volatility. Lee also expressed optimism about 2026, citing a resilient economy, potential deregulation, and favorable earnings comparisons, which could drive export-led growth if tariff policies align.
Despite the market’s recovery, Lee acknowledged that reaching new all-time highs remains a challenge, though he views the risk-reward as positive. Addressing concerns about the permanence of tariffs, particularly comments from President Trump suggesting long-term measures, Lee maintained that new highs are achievable in 2025. He emphasized corporate resilience, noting that companies have navigated past shocks like COVID, inflation surges, and rapid Fed rate hikes. Lee also highlighted the recovery of assets like Bitcoin (BTC), which has surpassed its April 2 level, suggesting the S&P could climb toward 5,800 in the near term.
On inflation, Lee addressed the tension between tariff-driven price pressures and counteracting forces like oil prices. He pointed out that commodities, particularly oil, and labor market indicators, such as JOLTS data, suggest weaker inflation. Recent inflation data has also trended lower than expected. Comparing the U.S. to Europe, Lee noted that the ECB is cutting rates despite tariff concerns, as its inflation measure excludes shelter, unlike the Fed’s. If the Fed adopted a similar approach, its core inflation would be lower than Europe’s, yet U.S. rates remain significantly tighter. Lee suggested the Fed could justify rate cuts now, even with tariff uncertainties, given these dynamics. Overall, his outlook remains cautiously bullish, underpinned by corporate adaptability and improving market signals.
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