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Fundstrat’s Tom Lee stated the U.S. fairness market can discover additional upside from the Federal Reserve starting fee cuts and an Nvidia (NASDAQ:NVDA) monetary replace that underscores stable footing for the AI funding theme.
Lee, head of analysis at Fundstrat International Advisors, appeared on CNBC on Thursday, a day after the Fed’s July assembly minutes indicated “a number of” policymakers had been prepared to begin decreasing rates of interest in September. Buyers had additionally acquired a downward revision of federal job progress estimates over the 12 months ending in March.
The “revisions that simply got here out present loads of jobs disappeared. It is not as robust of a [jobs] market, and I believe it offers extra ammunition for the Fed to begin a chopping cycle,” Lee stated. “That is going to present loads of life to the financial system and to the [stock] market, particularly cyclical shares and small-cap shares,” he stated.
Lee spoke earlier than Federal Reserve Chair Jerome Powell on Friday was anticipated in his Jackson Gap symposium speech to sign by how a lot policymakers will start chopping rates of interest.
The U.S. financial system doesn’t seem like coming into a recession and the possibilities of a soft-landing are going up, Lee stated. “That is why this ought to be a benign chopping cycle – good for markets,” he stated.
The inventory market (SP500)(COMP:IND)(DJI) has demonstrated energy by sharply snapping again from a “gut-wrenching” rout earlier this month ignited by a U.S. financial progress scare, Lee stated. A slide in know-how shares (XLK) pulled the Nasdaq Composite (COMP:IND) right into a correction, however the common has since narrowed its loss to take a seat 5.5% beneath its all-time closing excessive.
“I believe tech remains to be in a very good place due to AI, and Nvidia (NVDA) ought to reinforce that,” Lee stated, forward of the Aug. 28 launch of the AI chipmaker’s Q2 outcomes. Lee stated Nvidia’s (NVDA) a number of isn’t demanding.
“Nvidia is perhaps 28 occasions ahead earnings, which, for one of the vital corporations on the planet, it’s not a excessive a number of,” he stated. “So if tech is in a very good place, after which we get Fed cuts, I believe it permits the general market to increase.”
The S&P 500 (SP500)(SPY)(IVV) stood 1.7% beneath its all-time closing excessive of 5,667 as of Thursday. This yr, it’s risen 16.8%. The Nasdaq Composite (COMP:IND) was up 17.8% YTD as of Thursday.
