Veteran investor Tom Lee says traders are higher off remaining bullish on markets regardless of the latest correction in equities and different threat property.
In a brand new interview on CNBC, Fundstrat’s head of analysis says that the correction in equities – which noticed the S&P 500 dip from above 6,000 to five,832 – is probably going a possibility for traders to go lengthy moderately than keep cautious.
“That is one other shopping for alternative in our view. 2024 has confirmed to be a 12 months the place the market’s been sturdy and it has eluded many alternatives for sustained weak point. I do know [December 18th’s] pullback was actually painful, however to us, I feel the elemental supporting shares are intact and I feel it’s alternative for traders right here.”
Lee notes that the volatility index (VIX) – which measures the inventory market’s expectation of volatility based mostly on S&P 500 index choices – rose sharply on December 18th. He says that traditionally, such a fast rise has correlated with market bottoms.
“The market has been bleeding decrease.
In case you take a look at internals for the final ten days, [December 18th] seems to be capitulatory as a result of not solely did we’ve a 90% down day, however the VIX exploded by 75%. There are solely 4 instances in historical past the place it’s risen 60% in a day, so [December 18th] was the fifth time in its 35-year historical past. Of these 4 instances, the market recovered all of its losses inside every week three out of the 4 instances. The fourth time it took a month.
So I feel what you had was folks panicking to get out of a momentum commerce that’s ending as a result of we’re so near year-end. However right here’s the attention-grabbing factor. The ahead VIX-futures curve barely moved. So it was virtually as if folks had been looking for safety by means of the VIX on [December 18th].”
As of Friday’s shut, the S&P 500 traded at 5,930 factors.
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