Fundstrat’s Tom Lee believes that the stock market still has room to grow, with three tailwinds that could drive further upside to record highs. In an interview with CNBC, Lee highlighted increased corporate earnings, a lack of margin debt, and a Federal Reserve set to cut interest rates as reasons to stay bullish.
Lee pointed out that earnings beat expectations by 7% in the first quarter, suggesting potential upside for the rest of the year. He also noted that valuations are not overly stretched, providing room for stock prices to continue rising.
Additionally, Lee mentioned that investors are not exhibiting the typical risk-on behavior seen at market peaks. With $6 trillion in cash still on the sidelines and margin debt remaining low, there is potential for investors to buy the dip and drive the market higher.
While Lee acknowledged the possibility of a short-term sell-off following the February CPI report, he ultimately sees the path of least resistance for the stock market as higher. Despite technical indicators suggesting the market is overbought, Lee believes that the current rally still has momentum due to the skepticism from many investors calling for a market top.
Overall, Lee’s analysis suggests that the stock market has the potential to continue its surge to record highs, fueled by strong earnings, favorable valuations, and cautious investor sentiment.
