Bet on cyclical stocks if Washington reaches a stimulus deal, says Fundstrat’s Tom Lee

Published Tue, Oct 20 20203:39 PM EDTUpdated Wed, Oct 21 202011:32 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

(This story is for CNBC Pro subscribers only.) Fundstrat Global Advisors founder Tom Lee told CNBC on Tuesday that investors should add exposure to cyclical stocks if Washington strikes a deal on another coronavirus relief package. "A stimulus deal is going to provide an important bridge to the economy because ... there's a lot of Americans suffering," Lee said on "Power Lunch." "The groups that will benefit from that stimulus are going to be economically sensitive, so I think you really want to be cyclically tilted if we do get stimulus." Lee's comments came as stocks were rising Tuesday, with the Dow Jones Industrial Average up more than 100 points. Investors were eyeing optimistic comments on the state of stimulus talks from House Speaker Nancy Pelosi , D-Calif., who has been negotiating with Treasury Secretary Steven Mnuchin . Lee, who also serves as Fundstrat's head of research, noted the damage caused by the coronavirus pandemic was still immense. "We are just exiting one of the worst depressions in five lifetimes," he said. However, Lee said there already are signs that cyclical stocks — those linked to the strength and weakness of the broader economy — would be the real beneficiaries of another stimulus package. "The consumer is starting to be a little braver in venturing out," he said, pointing to the TSA data that showed more than 1 million people went through security checkpoints Sunday. The figure represented a seven-month high and contributed to strength in airline stocks Monday. In general, Lee said he believes Wall Street has found itself in a waiting game, particularly around the upcoming presidential election between President Donald Trump and Democratic nominee Joe Biden . Despite the uncertain outcome of election, the former chief U.S. equity strategist at JPMorgan said he thinks stocks will continue to be attractive. Lee also was one of the earliest people on Wall Street to be bullish on the stock rally from coronavirus lows earlier this year. "I think the stock portfolio one is going to build post a Biden win or post a Trump win is going to be nearly identical," Lee said. "So I think risk-reward for stocks is pretty good because we're reading water but the economy has been strengthening and there's a lot of cash on the sidelines. And so far, Covid has not risen parabolically like it has in Europe but that, of course, could change."

The U.S. Capitol stands in Washington, D.C., U.S. on Thursday, Oct. 1, 2020. Talks Thursday between Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin brought no immediate breakthrough on a deal for a new pandemic relief package, while the House prepared to vote on a Democrat-only plan.

Stefani Reynolds | Bloomberg | Getty Images

(This story is for CNBC Pro subscribers only.)

Fundstrat Global Advisors founder Tom Lee told CNBC on Tuesday that investors should add exposure to cyclical stocks if Washington strikes a deal on another coronavirus relief package.

"A stimulus deal is going to provide an important bridge to the economy because ... there's a lot of Americans suffering," Lee said on "Power Lunch." "The groups that will benefit from that stimulus are going to be economically sensitive, so I think you really want to be cyclically tilted if we do get stimulus."