Fundstrat’s Tom Lee Says Stock Market Not in a Bubble, Predicts Fed Won’t Hesitate To Cut Rates

Feb 26, 2024
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The head of research at market intelligence firm FundStrat says the stock market most likely has more room to run to the upside.

In a new interview with CNBC Television, FundStrat’s Tom Lee says it’s too early to say the stock market’s in a bubble as there is no consensus yet that it isn’t in one.

“I don’t think we will have a bubble until the consensus declares there is no bubble and there is no risk and then that’s when we’re likely in a bubble. But I think a lot of folks raising the prospect that this is a bubble means it’s still early.”

According to Lee, if the Federal Reserve doesn’t cut rates, it would pose a threat to the stock market’s strength. However, Lee says there is a higher-than-expected chance that we’ll see rate cuts as soon as March.

“If the Fed doesn’t cut, I think it would pose quite a lot of risk for the stock market. I don’t think the Fed is going to hesitate just because the stock market has risen…

The Fed’s policy rate of close to 5.5% is the highest policy rate in the world for any developed country… I think the bond market itself is telling us that the Fed is overly restrictive right now…

I think the probability of cutting in March is higher than what’s being priced in and a lot of it will depend on what February’s CPI (consumer price index) looks like, which comes out March 12th, but we think there are some anomalies in the January CPI, including poor seasonal adjustment…

If those start to show improvements, I think whatever sort of hot CPI we saw in January, the repricing reverses to a large extent.”

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