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Equities 'Safe' Again; Focus on Cyclicals: Strategist

It is safe to jump into equities once again, said Thomas Lee, chief U.S. equity strategist for JPMorgan Chase. He cited U.S. companies with "balance sheets you haven't seen in 60 years" that are strengthening earnings and moving to reinvest.

"There is a pretty strong case to be made for owning stocks in the context of a very, very strong earnings cycle that's on track to deliver S&P re-attaining prior peak earnings by sometime 2011," Lee told CNBC Monday.

He also anticipates the S&P 500 striking the 1,300 mark sometime by year-end.

Investors seeking value should snap up stocks hardest hit by the May selloff, particularly those companies with a strong role in the U.S. economic recovery, Lee advised CNBC.

"We do think there is upside to expectations as we see a global recovery avoid a double dip," said Lee. "The upside in estimates is going to come from the cyclical groups—the steels, the financials, the technology, basic material spaces."

The Europe Question

Still, the strategist noted, "it’s going to be very important for any forecast of 2011 earnings to not have Europe enter a recession."

Moody's Monday downgrade of Greek bonds to junk status isn't enough to slash optimism, he said, as the debt had already been discounted under the assumption that a downgrade was coming.

More important on the Greek front, Lee said, is the debt-laden country's ability to meet its goals in fiscal austerity.

"The most important thing to hear out of Greece is going to be assurances that they are going to meet these budget cuts," Lee said.

Scorecard—What He Said:

  • Lee's Previous Appearance on CNBC (Nov. 24, 2009)

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Opposing Market Views:

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CNBC Slideshows:

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Companies in the News:

BP

ExxonMobil

Merck

Bank of America

Citigroup

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Disclosures:

No immediate information was available for Lee.

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