Fundstrat’s head of research, Tom Lee, says the Federal Reserve’s next move could unleash a powerful rally across crypto and tech stocks, including the AI trade.
In a new CNBC interview, Lee says the bull cycle remains intact and the artificial intelligence trade has more room to run to the upside.
The veteran strategist frames the moment as mid-cycle for the bull market, comparing it to past episodes when the Fed took a long pause before easing. He pointed to September 1998 and September 2024 as playbooks for what could unfold when policymakers cut rates after long pauses.
“So I’m looking at September 1998 and September 2024 as the playbook, because those are both years where the Fed was on extended pause and they cut in September. The number one trade is the Nasdaq 100. So I think that’s why the Mag 7 and the AI trade get a lot of liftoff.
The second is monetary liquidity sensitivity, global central banks easing. That’s Bitcoin and Ethereum, and seasonally strong. I think they could make a monster move in the next three months, like huge. And the third, of course, is interest-rate sensitives. That’s really small caps and financials. But really, the first two might be the standout trades.”
Last week, Lee said he believes the AI trade is currently undervalued before naming small caps as an even cheaper stock group due to the Fed’s tight monetary policies.
“I wouldn’t want to try to pick a slice of AI to talk about being undervalued. But if we think AI is undervalued, what’s even more undervalued is small caps, because that’s been held at bay because the Fed has not been cutting rates.
Fed’s been on hold all year. And for the first time since last year, the Fed is cutting in September. A September cut after a pause has only happened in 1998 and 2024. And both times are good periods for small-cap stocks.”
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