Tom Lee mentioned Monday he expects the inventory market’s sturdy begin to April to proceed all through the month as a part of what he is beforehand dubbed a “face-ripper rally.”
“Establishments raised nearly $200 billion of money because the begin of the yr, so that they’ve turned fairly cautious, they usually’ve been fading or promoting their tech and progress holdings however they’ve solely simply begun to nibble on the … epicenter [stocks],” mentioned Lee, whose agency considers these to be firms that had been among the many hardest-hit within the pandemic however stand to realize from the financial restoration.
“So, I feel there is a degree of shock coming in April as a result of we already had a robust end starting Wednesday of final week. It is actually three days of sturdy rallies and historical past reveals that is actually constructing as much as be what could possibly be a, probably, S&P 4,200 earlier than the tip of the month,” Lee mentioned.
The broad fairness index reaching that degree would symbolize roughly 3% upside from Monday’s shut.
Moreover, Lee mentioned it could make the April rally “one thing that’s each actually sturdy however, extra importantly, fairly an enormous shock for establishments.”
As for what occurs after a so-called face-ripper rally, Lee mentioned there could possibly be a interval of uneven buying and selling.
“I feel if the S&P does actually rally strongly this month at a time when establishments are sitting on a lot money and there is a lot skepticism on this market, we might see an enormous chase and that might mark the excessive for the yr,” he mentioned. “I would not say that is our base case, however sure, we must consolidate these positive factors.”