Fundstrat World Advisors managing associate Tom Lee thinks the U.S. Federal Reserve is finished elevating its benchmark rate of interest.
In a brand new interview with CNBC, Lee says that’s he optimistic in regards to the market and inflation numbers.
“I feel [last week’s] CPI (shopper value index) report type of reveals that inflation’s on a glide path decrease. The issues which can be nonetheless inflationary – like auto insurance coverage, motorcar restore – aren’t issues the Fed’s essentially making an attempt to focus on with increased charges, but it surely’s extra of a supply-chain work-through.
So I feel over the following three months, we might see core CPI at 0.2 or much less. That will actually enable the Fed to breathe simpler, and that’s why I feel the final hike was July.”
The Shopper Worth Index (CPI) is often used as a proxy to trace inflation charges. Merchants hold a detailed eye on the metric because it might probably sign whether or not the Fed would proceed to lift rates of interest.
Final week’s CPI report indicated shopper costs rose 0.2% in July, which the White Home described as “at market expectations.”
Lee, nonetheless, notes that many inventory market merchants don’t share his optimism.
“I don’t suppose individuals are even that bullish. I imply this week everybody’s been fast to show bearish. One simply has to take a look at the feedback from numerous of us they usually’re already again within the exhausting touchdown camp…
But we all know buyers pulled $115 billion out of the inventory market this yr and there’s $500 trillion in money, and mortgage charges might drop fairly dramatically. If the Fed is finished and the [US 10-year treasury note] stays at [4%], mortgages ought to drop to five.5%. That’d be massively stimulative subsequent yr.”
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