The stock market is set up for a solid rally into year-end as Wall Street shakes off a recent rough patch, Fundstrat’s Tom Lee said.
Lee, who has gained a following for calling the market bottom in March 2020 and remaining bullish as stocks have risen to new highs over the past year, bumped his year-end price target for the S&P 500 to 4,800 from 4,700 on Tuesday night.
The new target is more than 6% above where the market closed Tuesday (4,519.63), which would put this rally on similar footing with other rebounds from earlier in the year.
“The S&P 500 is up 20% YTD, but this has been a jagged year of progress. We have listed the litany of setbacks/headwinds in our prior comments, but the chart below highlights the type of ‘ping-pong’ market seen in 2021. … After each of the two earlier episodes, the S&P 500 rallied +7%,” Lee said in a note to clients.
The market has already started to rebound from a rough September, which saw the S&P 500 fall nearly 5%. Lee attributed that decline to concerns about stagflation and investors thinking that a top was in, but said he believes the bull case is on firmer footing.
“This negative view could prove to be right. However, the improvement in market technicals, such as clearing the 50-day moving average, is actually suggesting that underlying trends are getting stronger,” the note said.
The S&P 500 was 0.6% from a record through Tuesday’s close.