Tom Lee, co-founder and head of research at Fundstrat, a financial market research agency with the title of “the magic operator of Wall Street,” warned not to buy when the stock market falls now, because the stock market will experience a wave of sell-off in the next few weeks before it actually bottoms out.

Due to factors such as the US CPI data for March once again exceeding expectations, escalating tension in the Middle East region, and the Federal Reserve's hawkish guidance on interest rate cuts, the performance of US stocks was sluggish this week, and the S&P 500 index has been falling for four consecutive days.

Tom Lee, who previously made a very accurate forecast of the 2023 S&P 500 index trend, is one of the analysts who are most optimistic about the stock market this year. However, he warned that opportunistic investors should not rush into the market. He pointed out that the market volatility indicator VIX is soaring, and rising volatility usually triggers investors to sell off, which may put pressure on the stock market in the short term.

Tom Lee said, “Although we usually like to buy on dips, the surge in the Volatility Index suggests we have to buy on dips later.” He added that as the market appears to be about to bottom, buying opportunities may come soon, in large part because positive catalysts in the stock market are still working, such as strong corporate profit growth. According to FactSet's forecast, the S&P 500 earnings growth rate for the first quarter is expected to exceed 7%.

The Federal Reserve also appears to be preparing to cut interest rates sometime this year, even if it may be later than investors expected. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the market currently expects the Federal Reserve to cut interest rates once or twice before December this year.

Tom Lee said that if the conflict in the Middle East does not escalate further, market volatility eases, and investors show signs of slowing down the pace of sell-off, then US stocks may bottom out next month or even earlier. He also said, “I think this pullback is very good because it provides a good buying opportunity.” “All the factors that support the stock market are still there.” Tom Lee predicts that the S&P 500 may reach 5,200 points before the end of the year. He also pointed out that in the best case, the index could reach 5,500 points or higher.

Editor/Jeffrey