The third quarter has come to a close, and the scoreboard for the year isn't pretty. The S&P 500, Dow and Nasdaq composite index have dropped roughly 7 percent, and many former market leaders including health care and large-cap tech have seemingly fallen off a cliff. But one top strategist says that because expectations are so low going into the home stretch, there may be nowhere to go but up.
"It feels like someone called fire in a crowded theater," Fundstrat Global Advisors co-founder Tom Lee wrote in a research note this week. "We find clients more scared than any time since 2009."
On CNBC's "Fast Money" on Wednesday, Lee laid out 3 key reasons why dismal sentiment may actually be an indicator that stocks could be headed higher.
First, Lee addressed the Street's "grim expectations" for third quarter earnings. "A lot of times how markets react to earnings has to do with expectations," Lee said, adding that this time around, "people are expecting a horror show."