Fundstrat’s Tom Lee isn’t worried yet.
In a new interview with CNBC, Lee says he’s still bullish on stocks and crypto going into the end of the year.
The main reason for his unflappability? A predicted tailwind from the U.S. Federal Reserve.
“The Fed is set to cut in December, but also today is the day that quantitative tightening ends. The Fed’s been shrinking its balance sheet since April 2022. It’s been a pretty big headwind for market liquidity. The last time we had an end to QT, quantitative tightening, was September 2019.
And if you look back at that period, the markets really responded well. I think within three weeks, [they] rallied more than 17%. So I do think the timing of QT ending, which is now essentially QE starting, and at a time when November kind of was topsyturvy, so I think people got cautious, but now have to performance chase. And then you have typically a seasonal tailwind, so I’m pretty bullish into December, even with maybe the first day being rocky.”
Lee thinks the labor market is “holding fine” but argues that the Fed doesn’t want it to worsen.
“I think the inflation story has actually weakened a lot. So to me, the Fed would be cutting for the right reasons, which is, as they look at the next 12 months, the tariff inflation impacts are fading, but there’s risk on the job market, so I think it’s cutting for the right reason, which is real rates are tightening if they don’t cut.”
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