Source: Finance Association
Author: Huang Junzhi
① Tom Lee said investors should buy stocks before the May employment report is released next week;
② He said that core PCE data for April showed that inflation is cooling down, and previous data is beneficial to the stock market;
③ He said, “We think the stock market is likely to perform well before the May employment report is released next week.”
Tom Lee, co-founder and head of research at the US investment agency Fundstrat Global Advisors, suggested in the latest report released on Friday that investors should buy US stocks on dips before releasing the May employment report next week.
The three major US stock indexes all recorded gains in May. The Dow rose 2.32%, the NASDAQ rose 6.88%, and the S&P 500 index rose 4.8%. However, this week, the three major stock indexes all recorded declines this week, with the Dow falling 0.96% cumulatively, the NASDAQ falling 1.1%, and the S&P 500 falling 0.51%.
Lee said that the slight decline in the stock market over the past week has provided investors with an attractive opportunity to enter the market, especially after the release of core personal consumption expenditure data for April, and the employment report is about to be released.
On Friday, the April Personal Consumer Expense Price Index (PCE), known as “the Federal Reserve puts the most emphasis on inflation data,” was released, confirming expectations that US inflation will return to a slow downward trend.
Specifically, the US PCE index grew 0.3% month-on-month, and the core PCE index grew 0.2% month-on-month, and analysts expected 0.3%; in April, nominal PCE increased 2.7% year over year, and the core PCE growth rate was 2.8%, all in line with expectations.
“This is the best core PCE monthly data for the full year of 2024, which supports the view that inflationary pressure is weakening,” Lee said.
He expects that future personal consumption expenditure reports will continue to show a cooling in inflation, which should increase the possibility that the Federal Reserve will cut interest rates later this year and support the rise in the stock market.
“We believe the process of cooling inflation is sustainable.” he added.
Lee carefully studied these data and emphasized that since the end of 2022, after the release of the monthly core personal consumption expenditure report, the stock market has generally performed well (up 2.3% on average), especially when the stock market fell 1% in the five days before the data was released.
“Therefore, we think the stock market is likely to perform well before the May employment report is released next week,” he said.
The May employment report will be released on June 7 (Friday). Currently, economists expect the US to add 175,000 new jobs in May, and the unemployment rate will remain at 3.9%. Such a report will match the April employment report and may put some pressure on the Federal Reserve to cut interest rates as soon as possible.
In a report released earlier this week, Lee also predicted that after rising nearly 5% in May, the US stock market is expected to rise another 4% in June.
Editor/Jeffy