Major stocks indexes furiously rallied Monday after the U.S. and China decided to roll back tariffs for 90-days. Despite that, investors who held back haven’t missed the boat entirely, said Fundstrat Head of Research Tom Lee.
“The market is [about] flat year-to-date, so I don’t think anyone should feel like they missed anything,” he said on CNBC’s Power Lunch with Kelly Evans and Brian Sullivan. “They’re going to have a chance to buy a lot of companies. A lot of stocks got obliterated, and washed-out stocks are still opportunities.”
Many investors panicked in early April about the fallout from tariffs on consumer and business spending and how it would affect the economy. The S&P 500 and Nasdaq Composite both entered bear market territory, meaning a decline of more than 20% from recent highs. Though sentiment still remains deeply negative, both indexes have already erased much of their year-to-date losses.
The S&P 500 is now down 0.8% this year, while the Nasdaq Composite has declined 3.2%.
Lee believes there’s three main reasons why stocks are in the process of marking a V-shaped recovery. First, the high-yield spreads never confirmed the sort of panic seen in the stock market that justified recessionary concerns. Second, stocks experienced a waterfall decline, which is typically followed by a V-shaped recovery. Third, Lee said he had faith in U.S. businesses to navigate the tariffs “armageddon,” as they’ve been battle tested from the 2020 pandemic and 2022’s interest-rate hikes.
“That’s sort of why we told our investors to buckle down and even add exposure,” he said.
Even if the administration’s policies drag markets down again, Lee recommends that investors stay on track.
“For every investor who is investing and saving, they should hope for days where the VIX goes over 60 or the S&P 500’s down 7% from its highs because we know that those are dips you really have to buy,” he said.
Though many investors know better, they forgot those rules because in the heat of the sell-off, it didn’t feel like a day like today was on the horizon.
“You really can’t lose buying the S&P 500 at 60 VIX,” Lee said.
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