Market Correction Coming? Fundstrat's Tom Lee Issues Warning As S&P 500 Nears 5,000 Mark: 'I Think A Drawdown Follows'

The stock market is on the brink of a significant correction, according to a prominent Wall Street strategist.

What Happened: Tom Lee, a well-known equity strategist at Fundstrat, has warned investors that a stock market correction is imminent. This prediction comes on the heels of a 21% surge in the S&P 500 over a 14-week period, reported Business Insider on Wednesday.

“I think we [the S&P 500] might be approaching something close to 5,000, maybe a little higher, and then I think a drawdown follows,” Lee said.

He pointed out that in seven instances since 1927, when the S&P 500 rose 13 out of 14 weeks, the market peaked within the next two weeks. He also noted that the current market pattern is similar to that of the bear market low in October 2022.

Lee expects a 7% decline, which would bring the S&P 500 to around 4,600. He suggested that the timing of the Federal Reserve’s interest rate cuts could be a fundamental issue driving the decline.

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Despite this short-term bearish outlook, Lee remains optimistic about the stock market in 2024, predicting a rise to between 5,200 and 5,400 for the S&P 500.

Why It Matters: The stock market has been a topic of intense speculation and concern lately. While Lee predicts a correction, other experts have also expressed their concerns about the market’s stability.

Renowned investor Robert Prechter has warned of a major sell-off similar to the 1929 crash. He highlighted the extreme bullishness among investors and the various warning signs in the market.

Another expert, Cole Smead, CEO of Smead Capital Management, has warned of a precarious position for the U.S. stock market due to robust job numbers and wage growth, suggesting that the Federal Reserve's interest rate hikes may not be having the desired impact.

On the other hand, John Hussman, the president of the Hussman Investment Trust, has warned of market conditions currently ranking among the worst in history, with investors at risk of experiencing steep declines, similar to previous extreme sell-offs.

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