Fundstrat's Tom Lee says it’s not too late to buy market near record highs, but avoid these sectors

Published Mon, Jul 26 20212:00 PM EDTUpdated Mon, Jul 26 20213:15 PM EDT

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

Tom Lee is bullish on stocks into the end of 2021, even as all three major U.S. indexes finished last week at record highs . However, the strategist told CNBC on Monday there are parts of the market he views less favorably. "Utilities don't look great. Consumer staples don't look great," the co-founder of Fundstrat Global Advisors said on "Halftime Report," echoing a view shared earlier Monday by CNBC's Jim Cramer. "I'm not sure what to make of real estate because it's been such a great performer year to date, but actually there's been some relative weakening in the past month, so I might even actually throw in REITs," Lee added. Real estate is the second best-performing sector in the S & P 500 so far in 2021, gaining more than 26% and trailing only energy's year-to-date gain of nearly 31%. Lee said he acknowledges his less-than-rosy outlook on REITs may "sound contradictory, because I'm in a pro-reflation, pro-asset-based trade, but I think it's just the [capitalization] rates have gotten so low in real estate that it's tough." Lee's end-of-the-year target for the S & P 500 is 4,600. That implies a little more than 4% upside for the overall index from Monday's intraday levels. The broad S & P 500 is already up more than 17% year to date. Among Lee's favorite places to be in the market right now are the so-called epicenter stocks, a cohort of sectors and companies that were hit hard by the coronavirus pandemic . Lee coined the phrase earlier in the Covid crisis, during which the strategist gained prominence for his timely market calls. Concerns about slowing economic growth have bubbled up in recent weeks as the Covid delta variant has picked up steam across the globe, including in the U.K. and the U.S. Lee, whose firm also conducts coronavirus data research, said he believes Covid cases in Britain have reached their peak of this infection wave , signaling positive new for the U.S. in the coming weeks. As a result, Lee told CNBC on Monday he expects epicenter stocks — which tend to be in cyclical sectors such as energy — to start showing signs of strength as investors grow more confident about the trajectory of the economy. The falling daily case counts in the U.K. are "going to mark the bottom for this whole risk-on fear and that's why we think epicenter stocks really ignite either this week or next week," said Lee, who also serves as Fundstrat's head of research. He's a former chief equity strategist at JPMorgan, as well. Lee also reiterated his optimistic outlook on major technology companies, such as Amazon . "There's a ton of laggards there. Amazon, Apple , and even Workday, Visa, are up less than the market year to date. I just think part of the thinking for large-cap investors in the second half is, 'Whatever is not up 25% for the full year I'm buying because it's going to catch up.'" Watch the interview with Fundstrat's Tom Lee above.

Tom Lee, Fundstrat Global Advisors

Scott Mlyn | CNBC