Despite a turbulent start to the month, Fundstrat Global Advisors' Managing Partner and CIO Tom Lee remains steadfast in his bullish outlook, forecasting that the S&P 500 could rally to between 7,200 and 7,300 before the year concludes.
From Headwinds To Tailwinds
Speaking in a recent interview with CNBC, Lee dismissed concerns over early December volatility, citing a powerful convergence of favorable Federal Reserve policy and historical seasonal trends.
He identifies the conclusion of the Federal Reserve’s quantitative tightening (QT) program as a critical pivot point for market liquidity.
“Today is the day quantitative tightening ends,” Lee noted, marking the end of a balance sheet reduction policy that has been a market headwind since April 2022.
He drew a parallel to September 2019, the last time QT ended, which triggered a 17% market rally within three weeks. With the Fed also expected to cut interest rates later this month, Lee argues the monetary backdrop has effectively shifted from tightening to easing.
See Also: Goldman Sees S&P 500 At 9,000 By 2030—But The Real Boom Lies Elsewhere
Economic Resilience, ‘Performance Chasing’
Addressing concerns about the economy, Lee suggests that the “inflation story has weakened,” allowing the Fed to cut rates for the right reasons—specifically to support a labor market that is “holding fine” despite a recent data blackout.
He believes the November market “reset,” which saw leverage wash out of high-flying AI and crypto trades, has created a healthy foundation for a year-end surge.
Lee predicts that investors who became overly cautious last month will be forced into “performance chasing” as seasonal tailwinds kick in, potentially driving the S&P 500 up another 5% to 10%. “So, I think a 7,200 [to] 7,300 is likely for S&P,” he added.
Crypto Highs Delayed To January
While maintaining his optimism for equities, Lee adjusted his timeline for cryptocurrency.
Admitting that Bitcoin‘s (CRYPTO: BTC) recovery has been slower than anticipated following mid-October deleveraging, he now expects the crypto market to fully “wash out” over the next week or two.
Consequently, he sees Bitcoin potentially hitting new all-time highs by the end of January rather than December, driven by the broader recovery in risk assets and improved market sentiment.
December Begins On Somber Note
The benchmark indices fell on the first day of December on Monday, after advancing for all the sessions in the previous truncated week.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed lower on Monday. The SPY was down 0.46% at $680.27, while the QQQ declined 0.34% to $617.17, according to Benzinga Pro data.
The futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading lower on Tuesday.
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