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  • Writer's pictureRealFacts Editorial Team

Tom Lee’s Bullish Bet: S&P 500 Set for New Highs Amid Cooling Inflation

Fundstrat's Tom Lee

Fundstrat’s Tom Lee Says,” Pia Singh reports Tom Lee’s views from Fundstrat Global Advisors. Lee believes that if the Fed lowers interest rates even just once this year, it will be good for stocks, signaling support for the business cycle. He predicts that the S&P 500 will hit new record highs this month, driven by decreasing U.S. inflation and the strong momentum from May. Lee expects the index to reach 5,500 by the end of June, building on its recent 3% gain, with the latest close at 5,283.40. He thinks this positive outlook is backed by softer-than-expected inflation and a job market that’s cooling but not weakening significantly, creating a favorable environment for stocks.

Lee observes that the market’s over 4% decline in April hasn’t fully bounced back, leaving room for the May rebound to continue into June. He also mentions the significant cash—over $6 trillion—currently held in money market funds and the relatively low margin debt levels compared to October 2021. This suggests that investors haven’t fully committed to the market yet, potentially fueling a strong rally as they return.

Lee’s optimism is further supported by the expectation that the Federal Reserve will start lowering interest rates by September, seen as beneficial for stocks and the business cycle. He believes even one rate cut would show the Fed’s dedication to creating a favorable economic environment for stocks. Lee’s forecast also hinges on inflation trends. He points out positive signs in key inflation indicators like slowing shelter inflation and normalizing auto insurance costs in April. These trends, closely monitored by the Fed, are expected to continue in the May CPI report, due on June 12. If inflation continues to ease as predicted, it would further justify potential interest rate cuts by the Fed, strengthening Lee’s positive outlook for the stock market.


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