Hedge fund veteran Tom Lee says the inventory market is buying and selling above its honest worth and will witness an abrupt correction.
In a brand new CNBC interview, the managing companion of Fundstrat World Advisors says the inventory market is flashing a bearish sign after rallying practically 20% inside 4 months.
Whereas Lee says a market pullback is inside the realm of risk, he believes the correction doesn’t essentially imply that the longer-term uptrend is over.
“The market’s positively overbought. We’re 13% above the 200-day shifting common. Previously, that’s an indication of a powerful market, however additionally it is a market that’s susceptible to dangerous information.
I’m type of sympathetic to the view that there are indicators of a correction… However on the flip facet, I believe there are too many who’re rapidly calling this the highest. That places me within the camp that no matter weak spot we’ve could find yourself proving to be shallow.”
Lee additionally says that any correction will doubtless be a section of market consolidation the place traders rotate their capital to different shares which have but to have a significant transfer this yr.
“I believe profit-taking is wholesome as a result of that’s going to be a part of the investor mindset. Traders who’ve been concerned with tech and FAANG (Fb, Amazon, Apple, Netflix and Google) are having fun with fairly stupendous returns year-to-date. Now, it doesn’t imply that after they take earnings, they must essentially exit the markets.
To me, subsequent week… if the Fed surprises us in a approach as a result of it’s extra of a dovish pause, I believe traders are going to search for methods to seek out shares that rise on easing monetary circumstances. They could not come again to the FAANG. They could keep on with tech, however they could broaden out to industrials and financials.
So sure, profit-taking, nevertheless it doesn’t imply the market has to go down.”
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