US Markets

Tom Lee: This market rotation was already happening—the election just supercharged it

Sechan: Presidents don't dictate economic cycles, they magnify or dampen
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Sechan: Presidents don't dictate economic cycles, they magnify or dampen

On Friday, Fundstrat's Tom Lee stood by what he told CNBC ahead of the election, which was that markets were in for a rally no matter who won.

Lee, who is founder, managing partner and head of research at Fundstrat Global Advisors, said that while the market is seeing a large rotation, the shift was already in motion before Donald Trump's win.

"The bigger move has been this huge rotation … into the value names, small caps, the laggards. The irony is these were all trades that were working into Election Day, so they just all got turbo-charged," he told CNBC's "Fast Money Halftime Report."

Lee said that with the new administration getting ready to take over, investors are trying to gauge what a world with normalized interest rates and deregulation of banks might look like.

"We've almost created a generation of people who've compensated for low interest rates by doing things like buying dividend, going into private equity, seeking leverage in order to juice up returns. It's made equity management a terrible business," Lee said.

"That's the thing we have to imagine: In a normalized rate world, equity is a great business [and] stock selection makes a ton of sense," he said.

Appearing on "Fast Money Halftime Report" alongside Lee, UBS' Rob Sechan argued that the market rotation was in some ways related to what he called Trump's "draconian" rhetoric on trade, but agreed that presidents cannot sway markets in a major way.

Trading the Trump rally
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Trading the Trump rally

"People were rotating out of [technology stocks] into sectors that were working just based on that information," he said. "Presidents don't dictate economic and profit cycles, they magnify them or they dampen them."

However, the UBS managing director and private wealth consultant said that Trump's call for deregulation could bring some sweeping change to the banking sector.

"If you end up making some major change from a tax perspective as it relates to carried interest, think about the M&A boom that could come out of that," Sechan said.

And for those worried about a surge in inflation in response to Trump's policies, Sechan said the millennial generation is destined to counter that.

"You have a millennial generation that represents 25 percent of the population that is moving into peak spending and earnings years," he said, adding that as the economy gets better, fewer millennials will stay single, and more will start buying property instead of renting.

"They are the most educated generation we've ever had, and they are the most tech savvy, and that is absolutely deflationary," Sechan said. "Because everything that they look at to buy, they can check the price immediately."

And if millennials bring growth without inflation, to Sechan, "that's a great time to be an investor."