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 International Advisors says the inventory market is flashing a bearish sign after rallying practically 20% inside 4 months.
Whereas Lee says a market pullback is throughout the realm of chance, 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 transferring common. Previously, that’s an indication of a powerful market, however additionally it is a market that’s weak to unhealthy information.
I’m form of sympathetic to the view that there are indicators of a correction… However on the flip facet, I feel there are too many who’re shortly calling this the highest. That places me within the camp that no matter weak point we’ve got might find yourself proving to be shallow.”
Lee additionally says that any correction will possible be a part of market consolidation the place buyers rotate their capital to different shares which have but to have a serious transfer this yr.
“I feel 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 once they take income, they should essentially exit the markets.
To me, subsequent week… if the Fed surprises us in a method as a result of it’s extra of a dovish pause, I feel buyers are going to search for methods to seek out shares that rise on easing monetary circumstances. They might not come again to the FAANG. They could persist with tech, however they could broaden out to industrials and financials.
So sure, profit-taking, but it surely doesn’t imply the market has to go down.”
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