Fundstrat Global Advisors' managing partner Tom Lee told CNBC on Thursday he remains positive on stocks for the remainder of 2022, even as Wall Street confronts a more aggressive Federal Reserve and geopolitical uncertainty in Eastern Europe. "I think we are in no man's land for the moment. Our base case for first half 2022 was that markets would be treacherous. This is for more treacherous than we expected," Lee, who also serves as the firm's head of research, said in an interview on "TechCheck." Market conditions have been worse than Fundstrat anticipated "because, of course, we are in wartime conditions," Lee said, referring to Russia's invasion of Ukraine two weeks ago. Intelligence officials had been warning of an attack weeks in advance before its actual occurrence. "Do I think stocks will end higher from here on an absolute basis? Yes. I think even though we're at S & P 4,200, I think we could still exit this year with 5,100 or higher," Lee said. That would represent at least 19.2% upside from the S & P 500's close Wednesday at 4,277.88. Lee spoke as the S & P 500 fell on Thursday, a day after the broad equity index jumped nearly 2.6% for its best session since June 2020 . Over the past month, the S & P 500 is down close to 6%. It has fallen more than 11% year to date. "I think the foundation for the bull market is still intact," Lee said, pointing to what he's seeing in the Treasury yield curve to back up his view. He contended the consistently hot inflation readings in recent months may largely stem from "a spike in commodities that are now working its way through the system." "As painful as that it is, it is very different than being in a secular, structural inflation problem," he said. Lee also said he sees encouraging signs on the valuation front. The median forward earnings multiple for a stock in the S & P 500 right now is around 16.5, he said, compared with nearly 20 times at the end of 2019 before the Covid pandemic began. It's a similar story for free cash flow yield, too, Lee said. "Free cash flow yield on the median stock now is 5.8%. The 10-year is under 2%, so you're still getting paid a pretty hefty premium to own equities." "The fact that market valuations aren't causing you to have a huge margin of error on the downside means I just think you can't really get that hurt if you buy stocks here over the next 12 months," he added. Watch the interview with Fundstrat's Tom Lee above.
Tom Lee, Co-founder and Fundstat strategist.
Adam Jeffery | CNBC
Fundstrat Global Advisors' managing partner Tom Lee told CNBC on Thursday he remains positive on stocks for the remainder of 2022, even as Wall Street confronts a more aggressive Federal Reserve and geopolitical uncertainty in Eastern Europe.