① Tom Lee predicts that the S&P 500 index will rise 4% in June; ② he lists five major catalysts that may drive the stock market higher next month. ③ He said, “We expect positive support from the US stock market in June, so if there is an opportunity, we recommend buying on dips.”
Financial Services Association, May 29 (Editor Huang Junzhi) Tom Lee, co-founder and head of research at the US investment agency Fundstrat Global Advisors, predicted in the latest report that after rising nearly 5% in May, the US stock market is expected to rise another 4% in June.
Lee said that, driven by five favorable market factors,$S&P 500 Index (.SPX.US)$It could jump to 5,500 points next month.
“We expect positive support in the US stock market in June, so if there is an opportunity, we recommend buying on dips,” he wrote.
Five major catalysts
According to the above report, the first catalyst was a seasonal factor in favor of the bulls. Since 1927, the US stock market has risen 17 times in the first quarter and then declined in April. This situation usually indicates strong increases in May and June. And that's what's happening this year.
Lee pointed out that the probability that US stocks will rise in June is 100%, and the median increase is 3.9%. Such an increase would push the S&P 500 index to a record high.
“The seasonal factor itself is positive,” he added, “which is why we think 'there's still gasoline in the tank'.”
The second catalyst is the continued cooling of inflation. He expects several favorable inflation figures in the coming weeks. First is the April Core PCE, which will be announced on Friday, and then the May CPI, which will be announced on June 12.
The report said that the continued decline in used car prices and the trend of surging new car inventories all convinced Lee that the inflation rate would continue to decline. If this does happen, the possibility of interest rate cuts in the second half of this year should increase. He said, “I think the actual number of interest rate cuts by the Federal Reserve will begin to rise again before the end of the year.”
Currently, the market expects to cut interest rates only once in 2024. If more interest rate cuts begin to be digested by the market, it should become a driving force for the stock market.
The third catalyst is that investors' leverage ratios are still low, which indicates that the excitement that was common when the market peaked no longer exists. Lee stressed that the NYSE's $775.5 billion margin debt is still 17% below the peak of $936 billion in 2021.
The fourth catalyst was a record $6 trillion in “on-the-spot cash.” Despite Lee's statement,$NVIDIA (NVDA.US)$The blowout results announced last week may prompt investors to use cash to buy stocks.
Finally, he pointed out that the fifth catalyst driving the stock market higher in June was steady corporate earnings, which showed that corporate profits continued to rise. Lee wrote, “The earnings season shows that the fundamentals of the economy are intact, and I think artificial intelligence is getting stronger and stronger.”
According to Bank of America data, 97% of the S&P 500 companies have announced first-quarter results, and earnings per share are 3% higher than generally expected by the market. Although profit growth was mainly led by the “Big Seven Tech”, the index's other 493 constituent stocks performed steadily.
Editor/jayden