Breaking News: Top Investment Manager Predicts 7-10% Stock Decline in Next 2 Months
In a recent interview on CNBC's "Squawk Box," Tom Lee, managing partner and head of research at Fundstrat Global Advisors, warned investors to be cautious for the next eight weeks. With the market showing strength in seven out of eight months this year, Lee highlighted upcoming events like the September interest-rate cut and the election as potential factors that could make investors nervous.
As concerns about economic growth continue to rise, key employment data such as jobs reports and jobless claims are becoming more critical for market attention. Lee anticipates this trend to persist into September, with this week's nonfarm payrolls report for August expected to reveal a solid recovery in job creation.
However, Lee hopes the job report won't be too strong, as that could lead to worries about the Federal Reserve reversing its policy easing stance. Recent inflation data has supported expectations for the Fed to cut rates three times this year by 25 basis points, but a significant cooling of the labor market could possibly prompt a more aggressive 50-basis-point cut.
Despite correctly predicting last year's stock market rally, Lee is taking a more cautious stance now that the market is entering its most challenging month. He believes that a potential downturn will present investors with a buying opportunity in the next eight weeks.
When asked about potential market turbulence, Lee described small pullbacks as "daily noise," but he sees a 5% decline as very likely in the coming weeks. He advises investors to be ready to buy the dip if the market experiences a downturn.
In terms of election-related trades, Lee pointed out that the weakness in oil prices, despite existing geopolitical risks, suggests that the market may be increasingly betting on a Trump re-election.
Analysis:
Tom Lee's warning of a 7-10% stock decline in the next two months serves as a cautionary note for investors. With key events like the September interest-rate cut and the election looming, market volatility may increase. The upcoming nonfarm payrolls report for August will provide valuable insight into the labor market's health and its potential impact on Federal Reserve policy. Investors should remain cautious but be prepared to seize buying opportunities that may arise during any market downturns.