Fundstrat's Tom Lee said Monday the stars are aligned for a massive risk-on rally in February after stocks declined sharply to start the new year. "The set-up looks like the 'V' for February is not Valentine's but violent rally," Fundstrat's co-founder and head of global research told CNBC's " Fast Money " on Monday. The market just wrapped up a tumultuous month with steep losses as investors grappled with the Federal Reserve's policy shift. The S & P 500 suffered its worst month since March 2020 at the depth of the pandemic, down nearly 5.3%. It was also the S & P 500's biggest January decline since 2009. Lee said several contrarian signals have reached levels that suggested a strong buy signal, including retail sentiment, which hit its worst level since 2013. "When institutional investors are cautious, retail basically priced in a bear market and sentiment's worst in eight years, you could have a huge rally," Lee said. "Recoveries from fast sell-offs are typically symmetric, meaning you should expect a violent rally." At one point last week, the S & P 500 dipped into correction territory on an intraday basis, briefly down 10% from its record high. The recent comeback pushed the large-cap benchmark about 6.3% below its peak. Lee has become a closely watched strategist during the Covid crisis after issuing some timely market calls. He was also one of the few strategists on Wall Street that called the pandemic bottom and the subsequent rebound. "Retail investors basically assumed that a bear market was starting so they raised so much cash in the last couple of months that we are essentially resetting a risk-on rally," he added.
Tom Lee, Fundstrat Global Advisors
Scott Mlyn | CNBC
Fundstrat's Tom Lee said Monday the stars are aligned for a massive risk-on rally in February after stocks declined sharply to start the new year.
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