Fundstrat’s Tom Lee says Wall Street overreacted to Wednesday’s rate decision. He’s calling the sharp stock selloff a buying opportunity, not a warning sign.
Cyclical stocks, financials, and energy names took the brunt of the selloff. Lee expects those same groups to lead any rebound.
Dow Jones Sheds 631 Points
The Dow Jones Industrial Average fell 631 points, or 1.2%, to close at 51,461 on Wednesday.
The S&P 500 slipped 0.5% to 7,551. The Nasdaq Composite held roughly flat at 25,978. Retail sales for August also topped forecasts, easing some recession worries.
The selloff followed a move Lee had flagged days earlier. It deepened once officials signaled more hikes ahead before year-end.
Financials and energy stocks led the decline as traders rotated out of rate-sensitive sectors. J.B. Hunt sank 13.3% after warning of a sharp earnings decline.
Lee Sees a Buying Opportunity
Lee cited Goldman Sachs research pointing to fading inflation pressures over the next two quarters. He argued that shift should let cyclicals, financials, and other rate-sensitive stocks rebound.
I would be buying this dip.
Tom Lee, head of research at Fundstrat, on CNBC
Lee named cyclicals, technology, consumer discretionary, and financials as the sectors best placed to lead.
A Contrarian Take
Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management, was less convinced. He didn’t think the Fed needed to hike at all. Still, Greenhaus agreed Wednesday’s market reaction looked overdone.
I didn’t think they should hike rates.
Dan Greenhaus, Solus Alternative Asset Management, on CNBC
Greenhaus pointed to weak spots outside the AI-driven data center boom. He said non-residential construction has dragged on GDP for roughly eight or nine quarters. Higher rates, he added, will only add more pressure there.
Greenhaus also cautioned that much of Wednesday’s sharp swing was likely algorithm-driven.
Whether Lee’s call pays off may hinge on how fast that disinflation trend shows up.
Bitrue