The Magnificent Seven group of tech stocks fell ahead of the broader swoon, but that’s also partially why they will once again be in the market’s drivers seat, says Fundstrat Head of Research Tom Lee.
“Mag Seven will reclaim its old highs, and that’s of course why the S&P 500 should regain its old highs and move above that before year-end,” Lee said Monday on CNBC’s Squawk on the Street.
Stocks posted a shaky start to the week, dragged down by worries about credit-rating agency Moody’s downgrading U.S. debt one notch from AAA to Aa1. Treasury yields shot higher in response, unnerving investors who just saw stocks come off a tariffs-driven turbulent month.
Lee says that any declines should be viewed as a buying opportunity. He added that investors’ engagement will be a test for their appetite, as they rage-sold stocks at the bottom in April, and now they’re forced to chase the rally of hot stocks, such as the Magnificent Seven, into year-end.
Within that group, Tesla has led a big rebound. Shares are up over 50% from 2024 lows.
Just as investors looked past tariffs to some extent, Lee recommends they do the same with the downgrade.
“I don’t know if there is much signal in the downgrade,” he said. When Moody’s downgraded U.S. debt back in 2011, that was a signal, Lee said, but this time around, there is no information that the agency had that investors weren’t already aware of.
“Everyone should be aware that the U.S. has an unsustainable path for debt, but the real signal will be when an auction fails,” he added.
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