Stocks’ Continued Strength Bodes Well For 2nd Half

"An investment in knowledge pays the best interest." — Benjamin Franklin

Good evening:

For months, our Tom Lee has said inflation would fall throughout 2023 and the Federal Reserve would take its foot off the gas. Markets, which are forward-looking, recognized both themes in the first half. In our view, this week functioned as more confirmation of what Lee has been calling since stocks bottomed last October. Don’t look now, but the tech-heavy Nasdaq – technology has been Lee’s top pick all year – is up nearly 31% year-to-date. 

Fed week began with inflation data coming in softer than expected, declining for the 11th straight month. Lee and his team looked closely at the data and concluded that the details were better than the headline core figure alone might suggest – and better than expected. With the bulk of core CPI driven by components that use lagging data (specifically, shelter and used cars), Lee concluded that the CPI number “is reflecting inflation pressures that have been gone for some time. Thus, forward inflation is tracking lower.”