You have to give credit where credit is due. With Fundstrat’s top strategist, Tom Lee, now looking like a genius for his bold call of a market bottom (and bounce to follow) just a few weeks ago, when it seemed like the war in Iran would cause the return of a bear market, I do think the man has earned more fans.
Of course, new investors quickly realize how difficult it can be to time the market in the near term. It’s a move that I think is best left to some of the more seasoned traders out there or the algorithms. In any case, Lee’s call for a turnaround month and rally in the S&P 500 to (and above) the 7,000 was eerily well-timed.
Some may dismiss Tom Lee for being more of a perma-bull. But it is worth noting that the man has called for periods of volatility and “treacherous” markets before, so the label, I think, may not be fair.
In fact, Lee is opening up the door for a potential “inflation shock,” and, with that, some more volatility, as he put it in a recent sitdown with CNBC. Maybe even a steep bear-market drawdown after 7,300 is watermark is hit.
I think the big question is how Tom Lee’s calls will fare once we inevitably enter a bear market. Whether that’s within the year from now remains to be seen. Either way, Lee has to be one of the hottest names in terms of calls right now, and his firm’s Funstrat ETFs, I think, are sure to benefit as his batting average stays in a good spot.
What I find most remarkable about Tom Lee’s commentary is that the market has stayed relatively resilient in the face of multiple black swan events since 2020.
Tom Lee is right. The market has navigated through more than its fair share of black swans
Whether we’re talking about the COVID crisis and the record V-shaped recovery, the U.S.-Iran war and the impact on oil prices, the war in Ukraine, the Fed rate hike scare from 2022, or the post-lockdown inflationary spike, the regional bank (remember the Silicon Valley Bank days?) crisis, or the crypto plunge, the market has certainly found a way to roll with the punches. And moving ahead, the punches are probably going to keep coming. The market might eventually take an even bigger hit, but every time in the last six years, the S&P has found a way to get off the tarmac.
Perhaps Lee is right to be so bullish on the market, especially given it’s been dealt some heavy hits only to be up before the 10 count.
Does that mean the eighth big black swan won’t be the knockout blow to the market?
It’s hard to say. Either way, Tom Lee is the voice of comfort when market corrections hit. And thus far, he’s been right nearly every step of the way, sometimes with surgical precision.
The energy might not be over with
While it’s never a good idea to dismiss the risks posed by the Iran war and another surge in oil prices, I would point to Lee’s belief that a pretty rough drawdown could be in the cards in the second half once the 7,300 near-term target is hit.
With a new Fed and AI unpredictability, perhaps Lee is wise to point to energy and materials as the sectors to consider as they come off their peak. I would agree with Lee in that these sectors might be rich with opportunity.
In a prior piece, I highlighted two ETFs to bet on energy and basic materials as they came in a bit after a scorching run. In terms of individual names, I believe something like Occidental Petroleum (NYSE:OXY | OXY Price Prediction) stands out as most enticing, especially for investors underexposed to the energy patch and the possibility of a return to $100 oil. The 0.23 beta, near-2% yield, and potential to offset pressures from an oil spike, I think, make the name a worthy buy after a steep 18% drawdown.
The market might be less startled by the conflict in the Middle East, but, as an investor, I do think reconsidering a name like Occidental amid severe energy price movements could be a wise way to go. The oil price-sensitive name is incredibly well-run, and, perhaps most importantly, it has that Berkshire Hathaway (NYSE:BRK.B) investment.
Top Gaining Stocks
Top Losing Stocks