Tom Lee: Market to extend rally as investors realize strength of GOP sweep

Donald Trump
Carlo Allegri | Reuters

Fundstrat's bullish strategist Tom Lee told investors the market will go higher as it prices in the positive policy implications of the Republican sweep.

"Trump victory [is] a surprise but path forward not all negative. ... Clinton had been the favored 'horse' in this election cycle for investors, so it is natural for markets to see Trump's win as a 'shock,'" Lee wrote in a note Wednesday.

"We see 'negative' shock, weakness as short-lived. ... A sustained and deeper sell-off can only be justified if Trump's victory leads to a U.S. recession."

The strategist cited how historically, recessions were created by commodity shocks, central bank monetary policy tightening and "diminishing return on capital due to excessive investment," not elections of unpopular leaders.