Fundstrat’s Tom Lee says that shares could also be heading to new all-time highs (ATHs) over the approaching months.
In a brand new interview on CNBC, Lee says that three important components might prolong the S&P 500 bull market into subsequent 12 months.
“Bull markets are supported by sturdy fundamentals. And this can be a case the place not solely has the financial system survived extraordinarily excessive rates of interest, however the Fed is starting to chop charges. And an financial system that has form of been languishing has been China, and now now we have some stimulus and what seems to be like some bazooka insurance policies that’s supporting that area. And now we have a number of money on the sidelines. So I believe that this can be a formulation for shares to do fairly nicely the following three to 12 months, and that’s why we expect that we’d be nicely past 5,700 earlier than 12 months finish.”
The S&P 500 is buying and selling above 5,751 at time of writing.
Lee additionally says that small-cap shares could also be on the verge of breaking out. A small-cap inventory refers to corporations with a market cap typically between about $250 million to $2 billion.
“Small caps, they’re inside just a few share factors of an all-time excessive. And Mark Newton, our head of technical technique, thinks we’re nonetheless in an up transfer for small caps that simply began lately. However sure, it’s been disappointing. I believe it’s been particularly disappointing as a result of China and small caps traditionally are pretty extremely correlated, and so we’re seeing risk-on urge for food rising in some locations.
However I believe it’s only a matter of time. I believe a part of that is between now and the following month, which is round election day, there’s so much for traders to digest. It’s together with oil costs and the VIX (CBOE Volatility Index) is elevated. I believe these are issues which might be exhausting for somebody to say as we speak between now and early November, I wish to be shopping for danger outright. So I believe small caps nonetheless have good fundamentals. Earnings development is accelerating. The median P/E (price-to-earnings ratio) is 11 occasions, which is sort of seven turns decrease than the S&P. So I believe there’s nonetheless the case to be made that small caps are beginning a multi-year acquire. It’s simply been very uneven.”
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