The S & P 500 has further upside going into next year, predicts Tom Lee, managing partner of Fundstrat Global Advisors. He told ” Squawk Box Asia ” on Thursday that his target for the index heading into 2024 is 4,750 — or nearly 9% upside from Wednesday’s close. Lee said he believes that comments from the U.S. Federal Reserve meeting this week are giving stocks the “green light” to rally further. “Our view is that you want to be risk on this year,” he added. “And the reason we want you to be risk on is that we do think that we’re largely through the worst of this tightening cycle and we think inflationary pressures are easing pretty quickly.” That’s going to set the stage for earnings to outperform, he said. “Whenever you are at a turning point for earnings, that’s really when you want to be long cyclicals and essentially risk-on sectors,” Lee said. Sticky inflation and unemployment data led the Fed to its “hawkish pause,” but forward-looking data suggests inflation will fall further, said Lee. “I think a subtle thing that happened is that the Fed did not even mention the stock market once or even discomfort with the fact that S & P is up 15% year to date,” he said, adding that Powell “turned super hawkish” during the Fed meeting last November when he was asked about the rally then. “The market fell 5% over the next two trading days,” he said, of the period in November. “So I actually think the Fed is not concerned about the equity market here. I think that’s why … it’s a green light for stocks to continue to rally.” In a separate June 14 report, Lee said he would “buy the dip on a hawkish pause” and “buy a 5% pullback in stocks.” “The latest BofA Fund Manager Survey shows fund managers massively underweight equities. This is why we “buy the dips” in coming months,” he wrote. Lee said he’s currently overweight on tech, energy and industrials. He named some stocks in the report that he finds attractive. His information technology picks include Microsoft and Nvidia . He also picked ExxonMobil and Occidental Petroleum for energy, and American Express and Fiserv for financials. Are higher rates bad for Nvidia and Apple? Higher rates are typically considered bad for fast-growing tech firms, but Lee said the positioning of Apple and chipmaker Nvidia is “so strong.” “The real story for these companies is really about their market position and dominance,” he said. “There isn’t really another Apple out there or another Nvidia and as long as they’re central to what’s what’s happening … whether it’s AI or you know, the consumer, I don’t know if you want to say rate hikes are gonna kill their stories.”
