Big bull Tom Lee admits: 'August scares us' and here's why

Strategist Tom Lee is known for perennially serving as one of the biggest bulls on Wall Street, but when asked about the month ahead, he's striking a markedly cautious tone.

"August scares us," the co-founder of Fundstrat Global Advisors said Monday on CNBC's "Trading Nation." He pointed to two troubling stats in particular.

Lee observes that going back to 2009, the S&P 500 has fallen an average of 6 percent during the month of August — a stat that jibes well with the "sell in May and go away" line of thinking.

Further, the odds of a slip could be even greater this year, given that "the bond market has become a lot more volatile than equities, and whenever this happens, 68 percent of the time, the stock market falls in the following month."

This adds up to a "pretty scary" outlook for next month, Lee said. However, after an August slip, Lee expects a fall rip.

Or, as the strategist memorably put it in a recent note to clients: "sell the beach, buy the teach."

More specifically, Lee says that once the S&P falls to 2,100, "we think you should buy it," in anticipation of a substantial rally to Lee's 2,325 year-end price target. It closed Monday at 2,168.48.

Indeed, the long-term minded "shouldn't do anything, because a 2 to 3 percent sell-off isn't enough to warrant a big shift in a portfolio. But 2 to 3 percent for an active manager is relative performance."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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