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Tom Lee: It’s just ‘a matter of time’ until we hit record highs

Tom Lee’s bullish case for stocks

After a rocky first half of the year, stocks are set to end 2016 strong, according to market strategist Tom Lee.

"I think it's a matter of time before we break to new highs," Lee, of Fundstrat Global Advisors, said Thursday on CNBC's "Trading Nation."

With the closing Thursday at about 2,099, record high levels are less than 2 percent away. But the oft-bullish Lee won't be content there — he thinks the index will climb all the way to 2,325, which would represent an 11 percent gain from current levels.

For the strategist, the market's startling recoup of its losses after the U.K.'s vote to leave the European Union is a perfect illustration of why stocks are set to sail.

"There's this perception that investors are all in, but I think this is an example of how there's so much money sitting on the sidelines," particularly as bond yields continue to drop, Lee said.

After pointing out a few more potentially bullish factors, such as fiscal stimulus after the Brexit vote, the potential for U.S. exports to strengthen and energy's rebound thanks to an oil bounce, Lee concluded by turning again to the potential for a great deal of money to enter or re-enter the market.

"Investors have been reducing their exposure to equities at a time when inflation in the U.S. could be picking up," he said. "That's the 1990 scenario — that's the time when you'd expect equity [valuations] to start to accelerate. And if inflation picks up, we get earnings acceleration. So I think there's a fundamental story in the U.S. that doesn't have to be hurt by Brexit."

To be sure, investors who take the view contrary to Lee frequently make the case that valuations are already high, and that the outlook for global growth does not appear to be improving.