Fundstrat’s Tom Lee says the stock market is headed for an “abrupt change of market conditions” later this year, even as he believes current conditions remain favorable for stocks.
Lee made the comments in a CNBC interview following the Federal Reserve’s June 17 meeting, where new Fed Chair Kevin Warsh held his first press conference and dropped the central bank’s forward guidance on interest rates.
According to Lee:
“We still believe later this year there is going to be an abrupt change of market conditions, one that feels very much like a bear market. But we don’t want to stand and call a top. I think conditions are still favorable for stocks.”
Lee said the S&P 500 sits at 7,500 and pointed to the SpaceX IPO as a sign that risk appetite remains intact, noting the company has a float of just $90 billion.
He outlines three forces he expects to test markets later in the year: scrutiny tied to the Fed’s new five-task-force review process, additional share unlocks from the SpaceX, Anthropic and OpenAI IPOs, and supply chain shortages stemming from disruptions in the Strait of Hormuz.
A fourth catalyst, Lee says, would be speculative capital running dry, evidenced by stretched margin debt or a rush of cash to the sidelines.
Lee says he doesn’t see signs that investors are bullish enough yet for that fourth condition to be in place.
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