Fundstrat CEO Tom Lee believes the stock market is close to a bottom, noting that an abrupt recovery is now on the horizon.
In a new CNBC interview, Lee offers five reasons why he believes that the market pullback is close to ending.
“Yeah, I think we’re 90%-95% through the sell-off… Well, I think some of it is positioning, and Goldman had a really nice piece about hedge fund positioning…
Yeah, so I think that’s one component. The second is that retail sentiment is very negative because the AAII (American Association of Individual Investors) bulls less bears is minus 20. That’s a tactical sign. The VIX closed above 30. And now I think earnings season is going to show earnings are probably going to hold up better.
And then the last piece there is I think we’re just going to have to realize that stocks tend to bottom early in a wartime situation. So we’ve looked at every war since 1900. Stocks will bottom within the first 10% of that war. So if this is a two-year war, we’re going to bottom pretty early into that process.”
Lee adds that he expects the stock market to stage a resurgence once news about geopolitical tensions, oil price shocks and other risks stabilizes.
“Yeah, we’re in the fire-ready aim phase, where any little bad news is going to cause people to de-risk. But, as you know, that’s why the positioning is something to watch because at some point, people have gotten too neutral, and then less bad things can happen, and the market has a V-shaped recovery.”
As of Tuesday’s close, the S&P 500 is trading at 6,528.
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