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Fundstrat’s Tom Lee says a stock market correction appears imminent after the S&P 500 index rose 21% in 14 weeks.
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Lee remains bullish on stocks in 2024, but said history suggests the market is about to reach a short-term peak.
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“We think so [the S&P 500] I think it will probably be closer to 5,000, maybe a little higher, but after that there will be a drawdown,” Lee said.
A stock market correction appears imminent, according to one of Wall Street’s most bullish stock strategists.
Fundstrat’s Tom Lee told clients on Tuesday that the S&P 500 index is up 21% in 14 weeks, but is likely to fall in the coming weeks.
“We think so [the S&P 500] I think it will probably be closer to 5,000, maybe a little higher, but after that there will be a drawdown,” Lee said.
Lee looked at market history and found that since 1927, there have been seven instances in which the S&P 500 index has been up 13 out of 14 weeks. In four of his seven of these, the stock market peaked within the next two weeks.
Lee said the impending market correction also makes sense because it would mimic the stock market trading patterns that last occurred during the October 2022 bear market low.
The stock market rose 20% in 16 weeks from October 2022, followed by a 9% correction, then rose 21% in 19 weeks before falling 11%. Lee said drawdowns are not unusual given the S&P 500 index has recently risen 21%.
Lee said he expects a 7% decline to materialize, which would put the S&P 500 at about 4,600 based on current levels.
As for what underlying issues could cause such a decline, Lee said the timing of the Federal Reserve’s interest rate cuts could be a concern for investors, especially if the central bank waits too long and the economy begins to weaken. He said it could cause concern.
Despite the bearish short-term outlook, Lee reiterated his bullish view on the stock market in 2024, saying the S&P 500 index could eventually rise to the 5,200-5,400 range.
“At the end of the day, it’s a good year. We’re in a bull market,” Lee said.
Read the original article on Business Insider
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