Despite the recent market volatility, there are good entry opportunities for investors based on a key technical indicator, Fundstrat Head of Research Tom Lee said.
He cited that the number of stocks in the S&P 500 trading above their 200-day moving average—a measure of breadth—hit 15%, which has historically been a strong buy signal, meaning there are “a lot of bargains,” he said.
“It does feel like we’re having a lot of zigs and zags,” Lee said on CNBC’s Squawk Box with Joe Kernen, Kelly Evans, and Andrew Ross Sorkin. “But to me, everything that happened over the weekend, including the Sunday further explanations, all of this is unequivocally positive for stocks.”
That’s one of the reasons why Lee is still holding on to his S&P 500 year-end target of 6,600.
Stocks have struggled this year, dragged down by worries that a trade war would hurt domestic economic growth and force consumers to pull back spending. Compounding those concerns is the fact that the U.S. dollar and Treasury yields—perceived to be the world’s haven—have declined at the same time. Instead, money has flowed overseas, leading many to propose that the era of U.S. exceptionalism is over.
Lee doesn’t believe that. He said that if you look at the S&P 500, about 40% of the index’s returns come from new companies every 10 years.
“Is there going to be suddenly the best new company coming out of Europe instead of the U.S. because of the dollar? I doubt it,” he said.
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